DEUTSCHE BANK: Tesla Has Built A 'Truly Futuristic Vehicle', Buy The Stock Because It Could Double In 3 Years
In a note this morning, Galves upgrades the company to buy, and sets a $160 price target.
The stock is up 3% on the news.
Galves lays out five arguments for the upgrade:
1) "The stellar Consumer Reports review lessened our concern on quality issues that were experienced by early customers."
2) "U.S. orders have risen to 20k annualized (vs 12k-13k in Q1), reducing concerns on sustainability of demand."
3) "Supercharger network build-out has potential to extend and sustain TSLA’s competitive advantage."
4) "We’ve become more comfortable with the walk to 25% gross margins in Q4 (in fact, we expect an upside surprise in Q2). And now see potential for 35%+ on vol’s >50k."
5) "Based on proprietary work, we now expect the Gen3 veh to fully close the cost gap to non-EV competition with margins in the 25% range."
He then proceeds to flat-out gush over the company, writing for example:
...the addition of the latest connectivity/infotainment technology reinforces the view that Tesla has produced a truly futuristic vehicle.
Meanwhile, he dumps shade on the rest of the auto industry's ability to pump out electric cars:
As far as EV competition, we believe that traditional automakers are years behind TSLA in terms of the overall powertrain system and many still attribute limited success of their own EV’s to lack of consumer interest instead of on poor initial EV products / value propositions. We believe the vision of traditional automakers is being clouded by their own massively complex enterprises and the risks of disruption to core, legacy Internal Combustion Engine intellectual property and assets. This gives a company like TSLA a significant opportunity to sustain and possibly extend their initial competitive advantage.
And what about the range issue, memorably highlighted by the New York Times' John Broder?
Galves doesn't address Branch's concerns directly, but believes Tesla has designed a higher-quality battery compared with the electric cars produced by the rest of the auto industry:
Galves concludes by suggesting that even after a 400% rise over the last year, Tesla could still more than double inside of 3-4 years.
Wow.