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Feb. 1, 2020, 9:50 a.m. EST

Tesla earnings win praise even from doubters: ‘We fully admit things are better than we expected’

Stock surges after company targets more than 500,000 vehicle sales this year

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By Emily Bary

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“It’s becoming clear, in our view, that Tesla is on a path toward becoming the world’s only relevant publicly listed auto maker,” wrote Piper Sandler’s Alexander Potter.

Potter is impressed by Tesla’s “continued frugality,” which prompted him to cut his capital-expenditure forecast. “We are also giving Tesla more credit for operating leverage, because even after this quarter’s q/q increase in spending, Tesla’s thriftiness continues to impress.” Demand, according to Potter is a “non-issue” as the company prepares for new products and “apparently, an overwhelming number of Cybertruck orders.”

He has an overweight rating on Tesla shares and took his price target up to $729 from $553.

Canaccord Genuity’s Jed Dorsheimer said that the biggest near-term risk for Tesla is its expectation for a one- to one-and-a-half week delay in the ramp of Shanghai Model 3 production due to the coronavirus outbreak.

See also: Opinion: More fuel for Tesla? Stock could join the S&P 500 by the end of the year

“Given the numerous positive data points that were discussed and the cornerstone of continued profitability and (free-cash flow) generation, we view the company as solidly positioned as the leader of the EV revolution,” he wrote. Dorsheimer rates the stock a buy while lifting his target to $750 from $515.

Wedbush analyst Daniel Ives did not hold back in his praise for the company, even though he remains on the sidelines. “Last night completes a ‘comeback story for the ages’ from the dark days seen last April, with clear momentum around global electric-vehicle demand inflection heading into 2020 and beyond with Tesla leading the charge,” he wrote.

Ives expects Tesla’s “bull party” to continue as Shanghai demand looks “very strong.” He was encouraged by the company’s 22.5% automotive gross margin, which he said was “extremely impressive on the heels of the lower-margin Model 3 shift.”

He raised his target on Tesla’s stock to $710 from $550, while keeping a neutral rating. Still, Ives said a run up to $1,000 is within the realm of possibility.

“In our opinion, the new long-term bull case scenario on the stock is $1,000 with Tesla’s ability to ramp production and demand in the key China region during the course of 2020/2021 a major swing factor on the stock and $20 of earnings power by 2024,” Ives wrote.

Staff writer Claudia Assis contributed to this report.

Emily Bary is a MarketWatch reporter based in New York.

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