By Senad Karaahmetovic
Shares of Tesla (NASDAQ:TSLA) are up over 1% in premarket Tuesday after a Wolfe Research analyst upgraded shares to Outperform from Market Perform with a $360 per share price target.
The upgrade move, as well as reiterated Outperform rating on General Motors (NYSE:GM), reflects Wolfe’s raised 2025 U.S. EV penetration estimates to 20% from 10% on the back of the Inflation Reduction Act.
The EV penetration rate for this year stands at 5%, while the global 2025 EV penetration estimate is raised to 22%, from the prior estimate of 17.5%.
“The Inflation Reduction Act stands out as far and away the most consequential development for the U.S. Auto Industry that we’ve seen in a very long time. We believe that it has potential to affect the entire value chain—Significantly changing the trajectory of EV adoption, as well as the competitive landscape and earnings prospects for OEMs and Suppliers. We believe that this development is still far from fully appreciated,” the analyst said in a client note.
The analyst estimates that the U.S. Government may direct incentives worth $12 billion and $11 billion per year towards GM and Tesla, respectively.
“We would expect this to almost certainly influence OEM profitability (We now believe that select OEMs will become more profitable in EVs vs. ICE Vehicles, a very different view than we had just one month ago),” he added.
The price target on GM is raised to $50 from the prior $42 to reflect an incrementally more bullish.