Tesla Inc. (NASDAQ: TSLA) shares gained on Monday morning after Canaccord Genuity upgrade the electric automakers stock. Canaccord predicts a rally as electric vehicle penetration improves and Tesla gets closer to building a car that is mass produced at affordable prices, according to CNBC.
Tesla shares jumped by 3.3% during mid-day Monday following the upgrade.
Canaccord upgraded Tesla to a buy from hold and raised its 12-month price from USD 330 to USD 450 per stock.
“The EV penetration story is underappreciated by the Street,” analyst Jed Dorsheimer said in a note to clients Monday. “We see a more stable 2019 with far fewer concerns for investors in the company.”
Canaccord’s new 12-month price range represents a 47% gain from the closing price on Friday of USD 305.80 per share.
Tesla reported its fourth quarter shares in late January, however, the Company saw its shares slide after reporting weaker-than-expected earnings. For the fourth quarter, Tesla reported earnings of USD 1.93 per share on revenue of USD 7.23 Billion. Refinitiv analysts expected earnings of USD 2.20 per share on revenue of USD 7.08 Billion.
Tesla highlighted the quarter’s success to the Model 3 growth sequentially, driving in quarterly operating income of USD 414 Million despite decline in revenue quarter-over-quarter, higher import duties on components from a China, a price reduction, and the introduction of its cheaper Model 3.
The Company noted that the month of December was the highest volume ever for Model 3 production rates. With complications out of the way at its Fremont facility, Tesla now has the ability to achieve a production rate of 7,000 vehicles per week.
With the pace of the Model 3 can ramp up, especially in Europe and Asia, Tesla can see attractive profitability. However, the Company did forecast that production volume would falter a bit within its North American operations as it looks to focus more on Asia and Europe.
“We view the recent string of price cuts as further proof that the cost cutting and right sizing that the company has undertaken are resulting in concrete movement towards the ultimate goal of an affordable $35,000 Model 3,” Dorsheimer said. “With the strong operating cash flow generation of $1.23B and cash on the balance sheet of $3.7B, the liquidity concerns and convertible note repayment are no longer valid concerns in our view.”