Jefferies raises Tesla price target to Wall Street high of $2,500, says auto revolution still early

Published Wed, Aug 26 20208:51 AM EDTUpdated Wed, Aug 26 20204:42 PM EDT

(This story is for CNBC PRO subscribers only.) There's a new biggest Tesla bull on the Street. Jefferies on Wednesday more than doubled its target on the stock, lifting its forecast to a Street high of $2,500 from $1,200. The firm said it's "still early in the transformation of the auto industry," while reiterating its buy rating on the company. In a note titled "The Permanent Revolution Continues," analyst Philippe Houchois said that although Tesla's dominance in the automobile industry might begin to shrink due to growing competition, its presence in areas like software and battery capacity will continue to give it an advantage over rivals. Tesla has been on a blistering rally this year, gaining 383%. In the last year, the stock has soared 841%. Part of Tesla's share appreciation is due to the company reporting its fourth straight quarter of profits on July 22, as well as better-than-expected second-quarter vehicle deliveries. More recently, much of the surge appears to have been fueled by the company announcing a 5-for-1 stock split. Tesla closed at $1,374.39 on Aug. 11 — the day it made the announcement — but now trades around $2,203 despite the purely cosmetic nature of stock splits. Shares will begin trading on a split-adjusted basis on Monday. "We cannot pretend to understand the magnitude and speed of share price moves," Jefferies conceded. Still, the firm said there's "logic in the valuation exuberance." Tesla's high valuation is often cited by bears as reason enough to get out of the stock, but Houchois said the issue instead lies with legacy automakers. The valuation gap will continue to grow until OEMs build credible EV strategies and begin to offload their older operations. "Tesla has executed much better than anybody expected through the course of 2019, but also through the pandemic. I think all those things together will continue to support the valuation," Houchois said Wednesday on CNBC's "Squawk Box." Tesla shares advanced 6.4% on Wednesday. - CNBC's Michael Bloom contributed reporting.

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(This story is for CNBC PRO subscribers only.)

There's a new biggest Tesla bull on the Street.

Jefferies on Wednesday more than doubled its target on the stock, lifting its forecast to a Street high of $2,500 from $1,200. The firm said it's "still early in the transformation of the auto industry," while reiterating its buy rating on the company.

In a note titled "The Permanent Revolution Continues," analyst Philippe Houchois said that although Tesla's dominance in the automobile industry might begin to shrink due to growing competition, its presence in areas like software and battery capacity will continue to give it an advantage over rivals.