Tesla can surge another 71% from current levels as it unlocks more growth potential in China, one analyst says

• Tesla's meteoric rise is set to continue as it capitalizes on robust growth from China, according to Wedbush.
• In a note published on Sunday, Wedbush said that in a bull-case scenario, Tesla could jump another 71% from current levels, to $3,500.
• Pent-up demand for its cars in China and recent price cuts have created "a perfect storm of demand" for Tesla to take advantage of, Wedbush said.
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Tesla's 390% year-to-date rally has shown no signs of slowing down, and, according to Wedbush, investors should get used to it.

In a note published on Sunday, Wedbush said that in a bull-case scenario, Tesla could jump another 71% from current levels, to $3,500. Wedbush's prior bull-case target was $2,500.

The catalyst, according to Wedbush, would be strong growth from China.

Pent-up demand for the Model 3 in China and recent price cuts have created "a perfect storm of demand" for Tesla to capitalize on, Wedbush said.

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In the first year of operation for its Gigafactory 3 in Shanghai, Tesla looks poised to deliver 150,000 Model 3 units. And according to Wedbush, Model 3s sold in China will have higher margins than Model 3s sold in the US and Europe, which could "markedly increase the profitability profile" for Tesla going forward.

By 2022, China could make up 40% of Tesla's overall sales, if the company can keep up with demand, Wedbush said.

Ultimately, Wedbush said, Tesla is "back on track" to deliver 500,000 cars this year despite the COVID-19 pandemic, and it could ultimately deliver 1 million units per year by 2023.

Besides strong demand from China, Tesla's Battery Day event on September 22 could deliver a surprise to investors, Wedbush said.

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New innovations and "game changing" battery developments could mean Tesla is closer to announcing a "million-mile battery" that lasts decades and can withstand all types of weather and terrain, Wedbush said.

Wedbush maintained its neutral rating on Tesla and has a 12-month price target of $1,900, representing downside potential of 7%.

Shares of Tesla jumped 4% on Monday morning, ahead of a stock split on August 31.

Last week, Tesla surpassed Walmart in market value to become the ninth-highest-valued US stock.

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