Record deliveries a 'paradigm changer' for Tesla, stock to jump 50%, Wedbush says

Published Mon, Apr 5 20219:09 AM EDTUpdated Mon, Apr 5 20219:20 AM EDT

The record-setting quarterly vehicle delivery numbers Tesla reported Friday mark a "paradigm changer" for the electric car maker and for those thinking about an investment, according to Wedbush. The brokerage upgraded Elon Musk's automaker to an outperform rating from neutral and told clients that Tesla's first-quarter delivery numbers show that the pent-up demand for its Models 3 and Y is hitting its next stage of growth. "While the EV sector and Tesla shares have been under significant pressure so far this year, we believe the tide is turning on the Street and the 'eye popping' delivery numbers coming out of China cannot be ignored," Wedbush analyst Daniel Ives wrote. Tesla shares advanced more than 7% in premarket trading Monday morning and were set to curb their 6.2% year-to-date loss through Thursday's close. Ives added Tesla to Wedbush's "Best Ideas" list and hiked his price target on shares to $1,000 from $950, implying over 50% upside from where the stock closed Thursday around $661. The U.S. stock market was closed on Friday due to the Good Friday holiday. The bullish note came after the Silicon Valley auto maker's approximately 184,800 global deliveries during the three months ended March 31 surpassed the high set in the prior quarter and more than doubled from the same period one year ago. Tesla issued nearly 500,000 cars to customers last year, its first full year of profitability. Analysts surveyed by FactSet had expected Tesla to deliver about 168,000 vehicles during the first quarter out of concerns that a global semiconductor shortage could have impacted production, as it has at Ford and others. But despite the robust numbers so far this year, Ives thinks the momentum can persist thanks to both the backlog of demand as well as edits to the electric-vehicle tax credit. Congress, which introduced the tax break in 2008 to help offset the battery costs of electric vehicles and keep their prices in line with gas-powered cars, capped the benefit to the first 200,000 cars sold per automaker. But with Tesla and GM hitting their 200,000-unit tax-credit ceilings, there has been a price disadvantage compared to competitors and underutilization of the credit, Ives wrote. "In our opinion based on Beltway chatter, we believe this dynamic is about to change in a big way for Tesla," the analyst wrote. "We expect Congress to ultimately remove the ceiling on the EV tax credits as part of the broader $2.3 trillion Biden Infrastructure Plan and also moving this potentially to a ~$10,000 credit to catalyze EV consumer demand." Ives wrote that China and European markets were "particularly robust" in the first quarter and put Tesla to exceed 850,000 cars for the year, which would eclipse even Wall Street's best-case scenarios. "With a green tidal wave kicked off by Biden last week in the US, and global EV demand skyrocketing (as also seen in the Nio and Xpeng numbers) going after a $5 trillion [total addressable market] over the next decade, we believe these delivery numbers are a paradigm and sentiment shifter for the space going forward." — CNBC's Michael Bloom contributed reporting.

An employee assists customers in a Tesla store on January 23, 2021 in Wuhan, Hubei Province, China.

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The record-setting quarterly vehicle delivery numbers Tesla reported Friday mark a "paradigm changer" for the electric car maker and for those thinking about an investment, according to Wedbush.

The brokerage upgraded Elon Musk's automaker to an outperform rating from neutral and told clients that Tesla's first-quarter delivery numbers show that the pent-up demand for its Models 3 and Y is hitting its next stage of growth.

"While the EV sector and Tesla shares have been under significant pressure so far this year, we believe the tide is turning on the Street and the 'eye popping' delivery numbers coming out of China cannot be ignored," Wedbush analyst Daniel Ives wrote.