Deutsche Bank upgrades Tesla after 'Battery Day,' says investors should 'take advantage' of pullback

Published Wed, Sep 23 20208:59 AM EDTUpdated Wed, Sep 23 20204:08 PM EDT

Jesse Pound @/in/jesse-pound @jesserpound

(This story is for CNBC Pro subscribers only). The initial Wall Street reaction to Tesla's Battery Day has not been glowing, but Deutsche Bank said in a note to clients that that makes it a great time to buy in. Shares of the electric vehicle company fell 10% on Wednesday following the event, where CEO Elon Musk gave updated delivery guidance and discussed producing a $25,000 car in future years. Deutsche Bank upgraded the stock on Wednesday morning to buy from hold, saying the event showcased Tesla's advantages in technology. "With the stock price indicated down post market as traders 'sell the news', we recommend longer-term investors take advantage of weakness to buy Tesla as the best way to invest in vehicle electrification," the note said. Shares of Tesla were under pressure on Tuesday before the event, falling 5.6% after Musk said on Twitter that the batteries that Tesla is producing would not be in "s erious high-volume production " until 2022. However, Deutsche Bank said in the note that the timeline laid out by the company should help Tesla continue to grow. "The massive battery cell capacity it plans to build (100 GWh by 2022; 3,000 GWh by 2030) should also help unlock large new markets for Tesla, including commercial trucks, stationary storage, and especially supplying other OEMs," the note said. Tesla has been one of the most volatile large cap stocks this year and made big moves following an announcement of a stock split. The stock has gained about 400% this year but has dropped 15% in September, leaving it with a market cap of just under $400 billion. The firm raised its target price to $500 per share from $400, which would represent an 18% gain from Tuesday's close. Deutsche Bank also increased its long-term delivery estimates for the company. "We increase our earnings estimates to incorporate lower battery costs and higher volumes, and now see Tesla delivering 2m+ vehicles and generating $15 EPS by 2025 (from 1.4m and $12.25 previously)," the note said.

Elon Musk, CEO of Tesla, stands on the construction site of the Tesla Gigafactory in Grünheide near Berlin, September 3, 2020.

Patrick Pleul | picture alliance | Getty Images

(This story is for CNBC Pro subscribers only).

The initial Wall Street reaction to Tesla's Battery Day has not been glowing, but Deutsche Bank said in a note to clients that that makes it a great time to buy in.

Shares of the electric vehicle company fell 10% on Wednesday following the event, where CEO Elon Musk gave updated delivery guidance and discussed producing a $25,000 car in future years. Deutsche Bank upgraded the stock on Wednesday morning to buy from hold, saying the event showcased Tesla's advantages in technology.

"With the stock price indicated down post market as traders 'sell the news', we recommend longer-term investors take advantage of weakness to buy Tesla as the best way to invest in vehicle electrification," the note said.