China Spike in Model 3 Demand Bodes Well for Tesla, Says 5-Star


It has been a v-shaped recovery in excelsis for Elon Musk’s Tesla (TSLA). The EV pioneer surged to an all time high on Monday, ending the session at $949.92 per share. The new milestone brings Tesla stock to a remarkable 125% year-to-date gain.

The latest run up came following reports of strong demand for Model 3s in China. Tesla sold 11,095 Model 3s out of its Shanghai Giga 3 factory last month. After selling less than 4000 vehicles in April, according to Wedbush analyst Daniel Ives, the uptick “is a very strong indicator that demand in this key region is starting to ramp after an unprecedented soft macro backdrop and pandemic over the past few months.”

With demand in China accelerating, Ives expects Tesla to vie for market share “with a number of domestic and international competitors.” Anticipating macro conditions to improve alongside the loosening of global lockdowns, Ives believes further demand will be spurred by “some price cuts both in the US and China.”

Moreover, having exceeded the 10,160 Model 3s sold in March, Tesla’s first year of production at its Giga 3 factory appears to be “on a run rate to hit 100,000 unit deliveries,” and back on track to achieve its yearly targets.

“The key bogey to hit ~400k deliveries globally for the year (down from original 550k pre COVID) remains on track and could prove to be conservative depending on the pace of the lockdowns easing globally,” Ives said.

Despite the promising numbers, Tesla’s lofty valuation Keeps Ives on the sidelines with a Neutral rating. The 5-star analyst’s $800 price target implies shares will drop by 14.5% over the next year. (To watch Ives’ track record, click here)

So, that’s the Wedbush view, turning now to the rest of the Street; As is expected where Musk & Co. are concerned, opinions are divided when considering Tesla’s prospects. 9 Buys, 9 Holds and 10 Sells add up to a Hold consensus rating. The bears are in this EV’s driving seat, as the average stock-price forecast is $628.76 and implies downside of 33%.

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