Piper Sandler Increases Tesla Price Target Amid Strong Deliveries, Lower WACC

Piper Sandler has revised its price target for Tesla (NASDAQ: TSLA) stock, raising it to $310 from $300. The updated outlook is driven by improved delivery projections and a decrease in the company’s weighted average cost of capital (WACC). For fiscal year 2024, analysts now expect Tesla to deliver around 1.75 million units—an increase of 23,500 units from their prior estimate.

Strong Q3 Delivery Outlook

In Q3 alone, Tesla is forecasted to deliver close to 459,000 units, a 5.4% year-over-year growth. The firm emphasizes that China’s performance could be Tesla’s best quarter yet. “Unlike in other regions, it's possible to track weekly registration data in China. As a result, we have high conviction that Tesla will deliver 175k+ units in Q3,” analysts wrote.

U.S. Market and Cybertruck Impact

While demand in Europe remains weak due to decreased electric vehicle subsidies and broader macroeconomic headwinds, the U.S. market may see a boost from upcoming Cybertruck deliveries. The analysts acknowledge challenges in tracking intra-quarter U.S. sales but express optimism for a quarter-on-quarter increase fueled by the new vehicle launch.

According to Patreon, Tesla’s “Rest of World” regions, typically accounting for 10-15% of total deliveries, are projected to contribute 12% in Q3. Analysts believe this figure, currently estimated at 55,000 units, could be surpassed based on historical trends.

Blomst from Pixabay

Piper Sandler also notes a reduced WACC, now at 13.3%, down from 13.5%. However, they caution that delivery figures could be overshadowed by developments surrounding Tesla’s robo-taxi program, which is expected to be unveiled on October 10.

Rating and Potential Risks

The analysts maintain an "Overweight" rating on Tesla stock, while warning of potential risks to their thesis, including possible production delays, customer dissatisfaction, or supply chain issues.