Tesla Receives PT Increase to $265 from Jefferies

Tesla (TSLA) receives a price target increase to $265 from Jefferies. The firm maintains its Hold rating but expects a decline in gross margin for cars in Q2 2023.

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Jefferies raises Tesla price target by 43%

The increase in price targets for Tesla shares continues. Following a number of Wall Street analysts, Philippe Houchois of Jefferies also released an adjusted estimate for the manufacturer. On Monday, he raised Tesla’s price target to $265 from $185. This corresponds to an increase of more than 43 percent. Houchois retained Jefferies’ Hold recommendation.

The increase in the price target came after Tesla announced the results of deliveries for Q2 2023. The company reported global production of 479,700 units and deliveries of 466,140 units. Deliveries exceeded Wall Street consensus by about 20,000 units.

Jefferies expects gross profit to fall

While Tesla’s price target was significantly higher, Houchois has a negative view of gross margins for auto. “We join a consensus view that Q2 will be a trough in auto gross margin,” Houchois wrote, according to Yahoo Finance. He added that the team noted a “shift” in valuation drivers, notably based on Tesla’s lead in AI-based self-driving software.

Houchois forecasts Tesla’s revenue growth of 46% year-on-year in Q2 and a sequential increase of 6% from Q1. However, he expects auto gross margin to fall to 18.6%, down 40 basis points from the first quarter.

Jefferies is bullish on Tesla’s long-term outlook

In the long term, Jeffries remains optimistic about Tesla. The analyst notes that Tesla continues to widen the gap from legacy OEMs in terms of performance. Plus, it is probably the only OEM that is not playing the zero-sum game when it comes to shifting sales from traditional cars to electric vehicles. In the industry, in most cases, such a transition results in “negative margin trade-off[s].”

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