By Senad Karaahmetovic
A Piper Sandler analyst raised the price target on Tesla (NASDAQ:TSLA) to $360 from $344 while remaining Overweight-rated.
However, the analyst warns that Tesla stock price may head lower in the coming weeks, on the back of 1) shorter wait times; 2) China weakness; 3) geopolitics; 4) and rising interest rates (higher WACC).
Moreover, the analyst sees a possibility of Tesla cutting prices “at some point in the next year,” which could also weigh on shares.
“Given all this, some investors may understandably (but erroneously) conclude that Tesla faces a demand problem. Remember that Tesla is trying to address its backlog by boosting production ASAP. In other words: Tesla is striving for higher production, shorter wait times, and lower prices,” the analyst said in a client note.
While all these factors may weigh on Tesla shares, this outcome should be welcomed by investors, argues the analyst.
“Even after recent improvement in some regions, most consumers must still wait too long (3-5 months) to receive their vehicles,” the analyst added.
The higher price target on Tesla stock reflects increased software pricing, which offsets lower 2023 estimates due to likely price cuts.
“The new pricing of $15k, up from $12k, has an outsized impact on our earnings forecast, given the high gross margin (95%+) associated with FSD software,” the analyst concluded.