Concerns about Teslafrom (NASDAQ: TSLA) Sales of electric vehicles in China have increased recently, raising some concerns about the high valuation of stocks in emerging companies. Indeed, GLJ Research analyst Gordon Johnson says he believes monthly Tesla vehicle shipments in the important auto market have peaked at around 20,000 units. “If this turns out to be the case, it would significantly reduce the bullish TSLA case,” the analyst said in a note to investors on Tuesday.
But one analyst remains optimistic about Tesla stock: Wedbush analyst Daniel Ives. Here are his thoughts on the situation in China and the overall potential of the company.
While Ives admits that Tesla’s second quarter may have started unstable in China, he believes things will improve over time as market opportunities are so significant. He notes that he expects the share of electric vehicle sales in total annual vehicle market sales to grow from 5% to 10% over the next 10 years. As an electric car maker, Tesla could win, Ives said.
In addition, the analyst notes that recently released data from the China Passenger Car Association (CPCA) show a 29% jump in monthly Tesla vehicle sales in May compared to April, although 11,527 of the 33,463 were exported. However, with 33,463 deliveries reported, the company’s manufacturing in China appears to be a significant contributor to Tesla’s overall sales. For reference, Tesla delivered approximately 185,000 EVs worldwide in the first quarter of 2021.
Tesla has invested heavily in the Chinese market by building a large factory in Shanghai. Indeed, the Chinese market currently has enough tools to produce 450,000 vehicles a year, although it may take Tesla time to ramp up production enough to reach that capacity.
“The Model Y ramp in Shanghai is doing well,” Tesla said in a Q1 report. “We expect our Shanghai plant to continue to increase production in the quarter throughout the year.”
The road to $ 1,000
Ives has a 12-month target price for Tesla shares of $ 1,000, representing 67% upside potential over where the stock is trading today.
The analyst’s target price of $ 1,000 per share was set after Tesla announced first-quarter shipments that beat analysts’ estimates. During the target price hike, he said he believed Tesla’s shipments could surpass 850,000 this year – a huge jump from about 500,000 last year.
While these analyst views can be informative, investors should focus less on monthly and quarterly deliveries and more on Tesla’s annual performance. It is difficult to assess a company’s sales trend or expansion over periods of months or quarters.
Let’s zoom out and see what happens over the course of the entire year. The automaker’s total shipments to China in 2021 compared to its total market deliveries in 2020 and 2019 probably speaks more about the company’s long-term sales trajectory in the market.
This article represents the opinion of an author who may disagree with the “official” recommendation position of Motley Fool’s premium consulting service. We are colorful! Bidding on an investment thesis – even our own – helps us all to be critical about investing and make decisions that help us become smarter, happier, and richer.