Shares of the electric automaker climbed more than 3% to a fresh all-time high of $469.73 in Tuesday's trading session on the back of some news out of China: Tesla began production of the Model Y at its new Shanghai Gigafactory and delivered the first round of its China-built Model 3 vehicles.
Tesla also got a price target raise from analysts at Credit Suisse, who maintained their underperform rating on the stock but upped their target to $340 from $200 commensurate with the recent run. Tesla shares have climbed by more than 97% in the last three months.
Gene Munster, managing partner and co-founder of Loup Ventures, compared Tesla's progress in China with that of Apple:
"China's the largest [electric vehicle] market in the world, 60-70%. … The average EV sells for about 15,000 U.S. dollars, and so well below [Tesla's cheapest model, the Model 3]. But I think the right analogy here is what's happened with Apple. Their China business right now is 17% of total Apple revenue. And right now, China, for Tesla, in the most recent reported quarter, the September quarter, was 11%. And so they're not going to hit the sweet spot of the China market — they're just too expensive — but I think that if you start to put the pieces together and say that they can have, call it, 17% of Tesla's businesses in China, you start to build a model out where you can grow their business at 20% year over year. I'm almost at my punchline here. If you do that, 20% growth for the next few years — they'll probably grow at 30% this year — and put a 10% operating margin on that a few years out, which is debatable but, I think, achievable, and a 30 multiple on that, you get to $150 billion. So, there's room. … Tesla's maintained their, call it, 70% share in the U.S. That's going to decline over time, no doubt, but we're talking about 450,000 vehicles this year in a market that's 90 million globally. And so when I think about that road to a higher market cap, there's some asterisks there, [CEO] Elon [Musk] needs to continue to behave, but I think that the market and, most importantly, I think that their technology has this 10-year headstart, very similar to what happened at [Amazon Web Services] that a lot of people ignored. But that is fundamental to, whether it's battery life or some of the visualization around autonomy, advancing this story."
Craig Irwin, who covers Tesla as senior research analyst at Roth Capital Partners, wasn't sure Tesla had such a clear-cut growth story in China's auto market:
"The big question is whether or not this is a comp to the luxury vehicle market in China or if it's more of a comp to the EV vehicles in China. So, most people looking at Tesla are assuming that it's really to the EV vehicles, and no, it's not comparable to the vast majority of vehicles that are being sold as EVs in China today. To the luxury vehicles? Yeah. There's a lot of tier-one automotive companies that make most of their money, actually, selling into China. So, Tesla's going to have to aim to compete against them rather than take a pre-existing slice out of the EV market. ... I think Tesla operates in a vacuum. I think that they're going to be strong competition, and I can't think of a stronger signal to Detroit of, 'Hey, we want credible EVs' as the market cap dislocation in Tesla right now."
"I'm a believer. [In] 10 months, he built that plant. Ten months. Hey, listen, the moment you throw a rock at a window and it goes right through it and the deposits soar. I mean, come on. And 27% of the float is short. People still don't believe."