Wedbush Securities has outlined its bull thesis for Tesla Inc (NASDAQ:TSLA) shares in 2022 based on Berlin/Austin, and China linchpins.
In a note repeating an 'Outperform' rating and 12-month price target of $1,400.00 on Tesla, Wedbush's analysts said: "As we head into 2022 Street optimism for the EV revolution led by Tesla is building after a bumpy 2021 due to the chip shortage and Rubik's Cube logistics issues. We believe the stage is now set for EVs to take a significant step forward in driving customer adoption in this green tidal wave with many winners as part of the biggest transformation to the auto industry since the 1950s."
They added: "Musk & Co. have navigated the chip supply shortages better than any automaker globally over the last six months, which is why Tesla is in a clear position of strength heading into 2022 with an inflection point year ahead."
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The Wedbush analysts said they see three main catalysts for Tesla in 2022 that if successful will be a major driver of the stock moving higher with their current base case price target at $1,400 and bull case at $1,800, noting that China is a key variable in the Tesla bull thesis.
They said: "The linchpin to the overall bull thesis on Tesla remains China, which we estimate will represent 40% of deliveries for the EV maker in 2022. While PR/safety headwinds were front and center in China earlier this year, we have seen this demand trend reverse aggressively in a bullish way for Tesla into year-end with the company now on a ~50k monthly run-rate for China in 4Q that could ramp further into early 2022.
"The chip/component shortage remains a headwind for Tesla (and every other automaker) however we view this as a transitory issue with our core focus on Model 3/Y demand which is outstripping supply by roughly 15% as it stands heading into year-end. We estimate the China story is worth $400 per share to the Tesla story for 2022."
The Wedbush analysts also highlighted Giga battery openings in Berlin and Austin and initial ramp-ups there as a focal point for Wall Street.
They added: "Right now Tesla has a high-class problem of demand outstripping supply with this issue now translating into ~5-6 month delays for Model Ys, some Model 3s in different parts of the globe. The key to alleviating these issues is centered around the key Giga openings in Austin and Berlin (resolving the Europe logistics issues going on for Musk & Co.) which will alleviate the bottlenecks of production for Tesla globally.
"We believe by the end of 2022 Tesla will have the capacity for overall ~2 million units annually from roughly 1 million today. While Austin has a clear path to launching its key flagship US factory (and HQ) in early 2022, Berlin still has some red-tape bureaucratic issues still to resolve before the launch begins in January/February timeframe."
And the analysts concluded that unit growth will be front and center for Tesla in 2022.
They said: "While supply chain issues have been a drag on overall unit growth for Tesla in 2021, we believe over the coming year this dynamic will significantly moderate with potentially 1.4 million to 1.5 million units now within reach annually for 2022. While China will be a key growth driver, we believe demand is building for Tesla's Model Y in the US and Europe with 2022 likely another 'breakout year' for Tesla and the EV industry.
"While logistical hurdles will be a near-term cost burden, we importantly believe Tesla has the potential to further expand its auto GM and profitability profile over the next 12 to 18 months especially."
Contact the author at jon.hopkins@proactiveinvestors.com