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Nov. 8, 2021, 10:07 a.m. EST

What makes Tesla worth $1,400 a share? Here’s why Jefferies has the highest price target on Wall Street.

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By Barbara Kollmeyer

As U.S. stocks continue to stake out new highs ahead of the holidays, some say it’s beginning to look a lot like a meltup out there. With a patient Fed and TINA (aka there is no alternative), what could go wrong?

A selloff for one big popular stock cascading into an avalanche for the broader market? Maybe. Over the weekend, Tesla /zigman2/quotes/203558040/composite TSLA +2.07% CEO Elon Musk worked Twitter into a frenzy, asking followers to vote on whether he should sell a 10% stake . After a vote to sell, shares are down around 4% .

Here’s Steen Jakobsen, chief investment officer at Saxo Bank, with a glass-half-full view: “The tactic of pre-emptively asking the public is smart as a traditional move with a block trade announced with the stock exchange could have been a negative story for Tesla. This move can remove that negative surprise and allow Elon Musk to liquidate some of his holdings at Tesla.”

Here’s another big investor saying, chill.

Musk’s latest Twitter adventure coincided with fresh bullish views from Wall Street. First up were Wedbush analysts, lifting their bull target to $1,800 a share from $1,500, citing the underlying EV growth story and a big China market.

Meanwhile, Jefferies analyst Philippe Houchois on Monday lifted his Tesla price target to $1,400 a share — the highest on Wall Street — from $950 in a note to clients. Here’s the crux of Houchois’ view and our call of the day where he lays out how legacy auto makers are struggling to catch up to Tesla:

“Like in 2020, Tesla’s price is sending a warning of relevance to traditional and also challenger OEMs [original equipment manufacturer]. With an acceleration of self-funded growth in Q3 and un-heard-of returns at a brand price point moving towards volume segments, Tesla looks more scaled up today than most OEMs and in position to turn the Legacy zero-sum-game into a negative one,” said Houchois.

The analyst pointed out Tesla’s last two sets of “impressive results,” and “multiple competitive edges” that are likely to last longer than many investors think. Such as “direct selling to battery density/cost, software, chip design/sourcing and design-to manufacture, altogether avoiding the complexity and inefficiency that are plaguing the industry’s business model.” And the response from OEMs is slow, with only one or two challenges tackled at a time, said Houchois.

Tesla is also reaching a point where it can “balance affordability and speed, goals which are as important as profitability in Elon Musk’s vision,” said the analyst.

As model range and price points drift toward midmarket and away from BMW and Mercedes-esque prices and with a still-to-be-confirmed Model 2 on the way, Tesla could grab share from bigger OEMs, “potentially claiming a disproportionate share of the industry profit pool in the coming 3-to-5 years as legacies enter the margin dilutive EV transition phase.”

The buzz

Shares of Live Nation Entertainment /zigman2/quotes/203077299/composite LYV -1.31% , are dropping after a deadly Houston music festival over the weekend, where a crowd surge killed eight people died and left scores injured.

U.S.-listed Chinese education companies Gaotu Techedu /zigman2/quotes/212597937/composite GOTU -12.56% and New Oriental Education & Technology /zigman2/quotes/201429187/composite EDU -6.16% are surging on a report in The Wall Street Journal  that China plans to issue licenses to companies to offer after-school tutoring

Jefferies analysts downgraded German auto maker Volkswagen /zigman2/quotes/203434344/delayed XE:VOW3 +2.14% /zigman2/quotes/206919008/delayed XE:VOW +2.17% to underperform from buy, saying CEO Herbert Diess’ constant Tesla references have “become counterproductive, highlighting vulnerabilities rather than imaginative solutions.”

Elon Musk’s brother Kimbal sold 88,500 Tesla shares on Friday, according to a Securities and Exchange Commission filing.

The House passed a $1 trillion public-works bill  late Friday, but President Joe Biden may be facing hurdles on ambitions over a bigger spending bill. That news is boosting several related stocks , such as Vulcan /zigman2/quotes/203479463/composite VMC +0.08% and Caterpillar /zigman2/quotes/203434128/composite CAT -0.0093% .

China exports surged 27% from a year ago . The big U.S. data this week will come Wednesday, with October consumer prices.

Trans-Atlantic routes between the U.S. and 30 countries officially reopen on Monday. And as COVID vaccines for younger kids roll out in the U.S., one of the world’s oldest six-year-olds tweeted his encouragement:

The markets

Stocks /zigman2/quotes/210598065/realtime DJIA -0.38% /zigman2/quotes/210599714/realtime SPX -0.15% /zigman2/quotes/210598365/realtime COMP +0.02% are modestly higher. Oil prices /zigman2/quotes/209723049/delayed CL00 +0.97% /zigman2/quotes/210219788/delayed NQ00 +0.56% are climbing after Saudi Arabia’s Aramco announced big December price hikes for Asia and Europe. Natural-gas prices hikes seem to be getting no relief in Europe.

There were big moves elsewhere in crypto, as Ethereum /zigman2/quotes/108573964/realtime ETHUSD +1.45% topped $4,700 for the first time .

Random reads

How a gambler with duffel bags of cash got a Los Angeles casino into big trouble .

A distressed teen was rescued after a passing motorist spotted her hand signal that has gained popularity on TikTok.

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