'Tesla Has More Levers To Pull Than Any OEM,' Says Analyst: Why He Sees 50% Upside For Stock Despite 'Bumpier' Trajectory

Tesla Inc TSLA shares have started to turn the corner, although the recovery had been bumpy amid worries concerning margins and demand.

The Tesla Analyst: Jeffries Analyst Philippe Houchois maintained a Buy rating on Tesla stock but reduced the price target from $350 to $180, a whopping 48.6% cut. The new price target still implied an upside potential of 47%.

The Tesla Thesis: Jefferies’ conviction that Tesla leads the industry towards a better business model was intact but the trajectory would be bumpier, analyst Houchois said in a note.

The analyst saw affordability as the electric vehicle industry’s key challenge. Tesla’s aggressive round of price cuts reverse the price increases earlier in 2022 and confirmed that it has more levers to pull than any OEM, he said. 

Houchois was of the view the opaqueness of traditional dealer models would help accelerate pricing adjustments across the industry.

See Also: Everything You Need To Know About Tesla Stock

“Most OEMs are just emulating Tesla, at various paces, and speed remains a critical competitive edge for Tesla in an industry largely stuck in zero to negative sum game of transition,” Houchois said.

Most companies are focusing on proliferating model ranges instead of maximizing scale and productivity, he added.

Speed and simplicity are Tesla’s main competitive levers to drive further affordability and resource efficiency,  Houchois noted.

According to the analyst, Tesla is bigger than Elon Musk, and ahead of the March 1 Investor Day, governance will loom large over critical decisions, from management commitment and structure to product/pricing strategy and capital allocation.

Houchois saw the appointment of Tesla China head Tom Zhu as No. 2 as a positive step.

The analyst cut his 2023 volume estimate to 1.7 million units and core auto gross margin to 24% or $2,500 per unit below 2022 levels. The revised price target factored in the lowered estimates and the higher cost of risk as well as the company’s unique profile of growth, margins, ROIC and FCF, he added.

TSLA Price Action: Tesla shares were up 5.49% to $129.11 on Tuesday, according to Benzinga Pro data.

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