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From: Eric10/5/2017 6:24:37 PM
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Tesla’s Biggest New Fan Has a Unique Background

Analyst Romit Shah compared Tesla to Intel, and predicted the stock will soar 46%.


By
Avi Salzman and Evie Liu

Oct. 4, 2017 4:47 p.m. ET


They make look sleek, but it’s what’s inside that really counts, says a new Tesla bull. Photo: Tesla


Tesla may be competing with car companies to sell electric vehicles, but the company has more in common with technology firms like Intel, argues Instinet analyst Romit Shah.

Shah is the newest analyst covering Tesla and he released a report on Wednesday predicting that the stock could soar to $500, or 46% above its Tuesday closing price.

Shah’s background is in computer chips, which he says gives him a special insight into Tesla’s business. Intel, Shah notes, became the dominant chip provider because it figured out how to add multiple functions onto a single chip and then take control of the entire process of making and marketing those chips. Over the years its products got more and more efficient, and it grabbed more and more market share.

Similarly, Tesla will dominate the electric vehicle market by controlling and perfecting every aspect of vehicle production, Shah argues. That starts with batteries, which Tesla produces at its “gigafactory” in Nevada.

“The Model 3 costs $140 per mile of range (versus competitors at $235 per mile) and we believe that Tesla is on track to reduce this to under $115 per mile by 2020,” Shah wrote.

Shah’s $500 price target is based on comparing Tesla, in part, to other technology companies. That may be why he’s an outlier among Wall Street analysts. As seen in the chart below, analysts have actually become relatively bearish on Tesla stock as the stock has risen. Their average price target is $313, according to FactSet, below Wednesday’s closing price of $355.01. The average target price fell below the stock’s price toward the start of this year, as some analysts questioned whether Tesla could hit its ambitious production targets for the Model 3.

(To see chart click on link below)

barrons.com
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