Tesla shares to soar on strong Model 3 profitability: Analyst

The analyst raised his price target for Tesla shares to $500 from $470, representing 81 percent upside to Friday’s close. Tesla shares rose 2 percent in premarket trading Monday.

Haissl said the Model 3 has significantly lower material costs versus the Model S since it uses a less-expensive electric motor and takes away features such as an air suspension and aluminum body. He also estimates the labor content is about $1,000 per car for the Model 3 versus more than $4,000 for the Model S due to “higher levels of automation and lower in-sourced content.”

The analyst played down recent fears that Tesla will move away from a more modernized manufacturing process.

“We think reports that Tesla is reversing its automated manufacturing strategy over-exaggerated the real changes to the production system,” he wrote. “We expect Tesla to remain the battery technology leader, as traditional OEMs have shown little effort to commit meaningful capital into battery technology.”

Tesla’s shares are down 11.1 percent year to date through Friday compared with the S&P 500’s 1.5 percent return. The company’s stock rose 2.8 percent Monday.

— CNBC’s Michael Bloom contributed to this story.

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