Tesla shares surge 13% as strong deliveries drive profit optimism

Tesla shares surge 13% as strong deliveries drive profit optimism

FILE PHOTO: The Tesla logo is pictured on an electric car at Brussels Motor Show
FILE PHOTO: The Tesla logo is pictured on an electric car at Brussels Motor Show, Belgium, January 9, 2020. REUTERS/Francois Lenoir

REUTERS: Shares of Tesla Inc surged 13per cent to a record high on Monday (Jul 6), extending their rally to over 40 per cent in five sessions after analysts raised their price targets on the electric car maker following its strong quarterly deliveries.

The day's jump increased Tesla's stock market value by US$30 billion, eclipsing the entire value of Ford Motor Co, currently at US$25 billion.

JMP Securities increased its price target to US$1,500 from US$1,050 after Tesla on Thursday reported higher-than-expected second-quarter vehicle deliveries, defying plummeting sales in the wider auto industry as the coronavirus pandemic slammed the global economy.

"We believe that the question to be considered is not whether the stock is expensive on current valuation measures, but what the company's growth and competitive position signal about the stock's potential for the next several years," JMP Securities analyst Joseph Osha wrote in a client note. Tesla's annual sales could hit US$100 billion by 2025, he predicted.

JPMorgan, which rates Tesla "underweight," raised its price target to US$295 from US$275, while Deutsche Bank upped its target to US$1,000 from US$900. The median analyst price target for Tesla is US$675, compared with its current price of US$1,372, according to Refinitiv.

Tesla's solid delivery numbers heightened expectations of a profitable second quarter, which would mark the first time in Tesla's history that it would report four consecutive quarters of profit.

However, with Tesla's stock up nearly 500 per cent over the past year, many investors believe the rally is unsustainable. The stock is trading at 158 times expected earnings, according to Refinitiv, an exceptionally high valuation.

Following Monday's surge, Tesla's market capitalization stood at US$245 billion, growing its lead as the world's most valuable automaker.

Source: Reuters

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