After revving up an astounding 508.3% in gains last year, electric car maker Tesla, Inc.'s (TSLA) stock has slowed down this year. Wobbling under an increasing list of problems ranging from an investigation by the National Highway Traffic Safety Administration (NHTSA) to supply chain issues, Tesla stock has made halting progress, rising by only roughly 7.3% this year.
- Wedbush analyst Daniel Ives has forecast a $1,000 price target for shares of electric vehicle (EV) pioneer Tesla.
- Tesla's stock has failed to replicate its spectacular gains from last year after it became mired in multiple issues, from regulatory scandals to supply chain issues, most of this year.
- Ives says Tesla will be the biggest beneficiary in a global push towards electric vehicles.
But Wedbush securities analyst Daniel Ives is betting that the company's stock will accelerate into Ludicrous Mode once again. He put out a note recently reiterating his Outperform rating for the stock and assigning a price target of $1,000.
"We believe the EV market opportunity and green tidal wave will translate into a $5 trillion overall market over the next decade with Tesla a disproportional beneficiary of this broader consumer adoption towards EVs and autonomous over the coming years," Ives wrote in a recent note.
In other words, Tesla will be the biggest gainer in a world transitioning away from gasoline to electric vehicles. Ives has forecast a production target of between 860,000 to 900,000 for Tesla this year and more than 1 million for next year. Tesla does not provide production guidance in its earnings calls.
In recent years, as it expanded into new markets, Tesla scaled manufacturing capabilities and opened plants in Shanghai and Austin. It ramped up from making tens of thousands of cars annually to almost 500,000 cars last year.
A Cost to Expansion
That increase in production figures, however, has come at a cost. While regulatory issues have plagued Tesla during its growth, this year has been particularly challenging one for the company. It is facing problems in multiple geographies.
In addition to dealing with authorities in the United States, Tesla has to contend with Chinese regulators as well. China is expected to become Tesla's biggest market in the future. But the company's entry there has been less than fortuitous.
A year after the launch of its Model 3 Sedan in China, Tesla is busy quelling safety scandals and privacy concerns. For example, safety issues reported on Chinese social media led to Tesla officials being summoned by five government agencies in February. They asked the company to "strictly abide by Chinese laws and regulations, strengthen internal management, and implement corporate quality and safety regulations."
Cameras within the company's cars have also generated safety concerns in a society with government surveillance. The barrage of negative publicity has taken its toll on sales of Tesla cars. According to figures released in August, they plummeted in July to 8,621—a drop of 69% from previous month figures.
Tesla is also battling supply chain issues stemming from the pandemic, such as chip shortages. During a June earnings call, Tesla CEO Elon Musk said the shortage was a "governing factor" in the company's output. The company has already delayed production on several anticipated models in its stable due to supply chain problems. Its Berlin manufacturing facility, which was supposed to open on July 1 this year, is also delayed. While Tesla reported record profits in June, the issues and delays are likely to have an effect on its bottom line in the near future.
But Ives remains unfazed and is laying store on its regulatory tailwinds, in the form of credits and government push toward EVs, to boost Tesla's attractiveness amongst investors. "Seeing the forest through the trees, we believe Tesla has a number of growth levers into 2022 that should accelerate growth and profitability with global electric vehicle demand further inflecting over the next 12 to 18 months. We continue to believe there are many winners in the EV arms race to play this transformational growth opportunity, including traditional stalwarts and pure play EV OEMs/supply chain plays with Tesla front and center," he wrote.