Piper Sandler analyst Alexander Potter raised his price target on Tesla stock by more than 130% to $1,200 a share. He’s the first to value the electric-vehicle leader at more than $1 trillion no matter how investors do the math.
Getty ImagesTesla stock is on the move, back above $800 in early trading Monday after another bullish call on Wall Street.
Piper Sandler analyst Alexander Potter raised his price target of Buy-rated Tesla stock by more than 130%, to $1,200 from $515.
His old target was set back in September, when shares traded for roughly $440. That feels like a long time ago in Tesla-time, but analysts don’t update their price targets every day, and keeping up with Tesla stock has been a chore.
Potter was Buy rated back then and kept his Buy rating after updated his thinking.
The price target rise is large, but it doesn’t feel like a snap decision. Potter’s Monday report is 104 pages long and he looks at all Tesla businesses including stationary power, auto leasing and software sales, among others. Summing it up, Potter sees all Tesla’s businesses generating almost $37 billion in free cash flow by 2025. Tesla generated about $2.8 billion in free cash flow in 2020.
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In the base automotive business, Potter sees Tesla delivering 894,000 vehicles in 2021, almost 5 million by 2024 and roughly 9 million by 2030. The rise in deliveries is a big part of the growth in free cash flow.
Potter’s new target price values the electric-vehicle leader at more than $1 trillion no matter how investors do the math.
Tesla has about 950 million shares outstanding. At $1,200 a share, Potter is valuing Tesla overall at about $1.1 trillion. That’s the first target that values Tesla’s market capitalization north of $1 trillion based on the basic shares outstanding.
But, as Barron’s has pointed out, Tesla has roughly 1.2 billion shares outstanding, on a diluted basis, according to data provider FactSet. The large difference between the number of basic and diluted shares outstanding is mainly due to stock options. CEO Elon Musk takes most of his compensation in stock. Those options will, almost certainly, be converted to stock someday, which is why financial regulators have a diluted share count in the first place.
Based on the diluted share count the $1,200 target price values Tesla at about $1.4 trillion. That’s more than Google parent Alphabet (GOOGL) and less than Amazon.com (AMZN).
Tesla stock is up about 510% over the past year.
Potter is a bull, but analysts overall are still cautious. Only about 25% of the analysts covering the stock rate shares Buy. The average Buy-rating ratio for stocks in the Dow Jones Industrial Average is about 57%.
Tesla stock is up 1.5% in early trading to about $808 a share. The S&P 500 is up about 0.5%. Tesla stock fell about 10% after the company reported fourth quarter earnings this past Wednesday.
Write to Al Root at allen.root@dowjones.com
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