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2 Tesla Analysts Break Down Fundamentals, Valuation, China Prospects After Q4 Delivery Report

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2 Tesla Analysts Break Down Fundamentals, Valuation, China Prospects After Q4 Delivery Report

Tesla Inc (NASDAQ: TSLA) nearly met what many thought was an insurmountable 2020 deliveries target in the wake of the COVID-19 pandemic — and beat Street projections.

What Happened: Tesla delivered 499,550 vehicles in 2020, just shy of CEO Elon Musk's 500,000-unit goal and ahead of the Street estimate of 481,261 vehicles. 

The total for 2020 was up from 367,500 in 2019, and topped off a year in which the company's share price rose 743%, according to Bloomberg.

The Tesla Analysts: JPMorgan analyst Ryan Brinkman maintained an Underweight rating on Tesla shares and increased the price target from $90 to $105.

Wedbush analyst Daniel Ives has a Neutral rating on Tesla with a $715 price target.

Why Tesla's Performance Doesn't Match Valuation: That fact that Tesla nearly met its guidance at the start of the year and essentially met its modestly revised guidance at the midpoint of the year is certainly impressive in a year that saw global light vehicle production fall 16% in 2020, JPMorgan analyst Brinkman said in a Monday note.

The performance is less impressive from the perspective of Tesla's valuation, the analyst said. 

The 697% increase in the stock price over the last year is not in proportion to simply meeting delivery guidance, he said.

"Tesla's ability to grow roughly in line with expectations in 2020 is impressive because it suggests greater underlying momentum given the headwinds faced in 2020."

The 2020 performance was impressive, but not as impressive as the stock price appreciation, Brinkman said. 

Related Link: Why Tesla Is Unlikely To Buy A Traditional Automaker Outright

Reflecting the higher fourth-quarter deliveries and reports of strong demand for Model Y vehicles in China, suggestive of higher future deliveries, JPMorgan raised its forecast for the company.

The firm increased its EPS estimates for 2021 from $2.63 to $3.40 and from $3.47 to $4.50 for 2022. Deliveries for 2021 and 2022 are expected to reach 715,000 and 885,000, respectively, in JPMorgan's view. 

Why China Demand Could Be Huge Driver For Tesla: Delivery beats by Tesla and its Chinese peers Nio Inc – ADR (NYSE: NIO), Xpeng Inc – ADR (NYSE: XPEV) and Li Auto Inc. (NASDAQ: LI) reinforce the view that Chinese demand is robust, Ives said in a note. 

The Chinese demand dynamic as evidenced by this weekend's delivery numbers will disproportionately benefit Tesla, the clear EV category leader, over the next few years, the analyst said. 

This is especially true in the key China region, which could represent about 40% of Tesla's EV deliveries by 2022, he said. 

TSLA Price Action: At last check, Tesla shares were rising by 2.87% to $725.93. 

Related Link: Tesla Model Y Deliveries to Start in China This Month Photo courtesy of Tesla.

Latest Ratings for TSLA

DateFirmActionFromTo
Feb 2021Morgan StanleyMaintainsOverweight
Feb 2021Piper SandlerMaintainsOverweight
Jan 2021Deutsche BankMaintainsBuy

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