Tesla stock target raised as China demand swings to a ‘tailwind’

Wedbush’s prolific analyst Dan Ives reiterated the bullish outperform rating he’s had on Tesla since January 2021, but lifted his price target to $225 from $200, with the new target implying about 18% upside from Friday’s close.

“Based on our recent survey work in the field, we believe the China EV [electric vehicle] reacceleration story for Tesla is just starting to hit its stride and should be a tailwind in [the first quarter],” Ives wrote in a note to clients. “The price cuts on Model Y/3 have resulted in a clear demand driver for Tesla in this key China region and coupled with the ‘reopening’ post lockdowns are having a meaningful impact for Tesla in the field over the last few weeks.”

Ives said he has seen signs that suggest EV buyers in China are favoring Tesla’s over autos from China-based rivals such as NIO Inc.
NIO,
-3.15%,
XPeng Inc.
XPEV,
-1.10%
and BYD Co. Ltd.
1211,
-3.53%.

He said the Biden administration’s move Friday that effectively makes more EVs eligible for tax credits provides another tailwind for Tesla, as it allows the company to raise prices on some models.

And Ives believes the overhang on the stock from Chief Executive Elon Musk’s purchase of Twitter is “slowly moving into the background.”

“We believe with Twitter itself starting to stabilize more from an advertising perspective along with cost cutting kicking in, the worries around Musk needing to sell more Tesla stock to fund Twitter losses has moved into the background,” Ives wrote.

Tesla’s stock has lost 5.9% over the past three months, while shares of NIO have dropped 7.8% and XPeng have soared 29.7%. The S&P 500 index
SPX,
-0.72%
has gained 9.2% the past three months.