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Tesla's Q3 Will Be 'Strongest Quarter Ever,' Piper Sandler Says

Tesla will see its 'strongest quarter ever,' a Piper Sandler analyst tells investors. Credit Suisse says the stock has 'been resilient.'

Tesla's  (TSLA) - Get Tesla Inc Report third quarter will be the electric-vehicle maker's "strongest quarter ever," according to a Piper Sandler analyst, who reiterated his overweight rating of the company and boosted his 2021 estimates.

Shares of the Palo Alto, Calif., company at last check were off 0.8% to $785.10.

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Piper Sandler analyst Alexander Potter, who has an $1,800 price target on the shares, said in a research note that "Q3 will be TSLA's strongest quarter ever, and we are increasing our 2021 estimates accordingly."

Potter said Tesla would deliver 894,000 vehicles in 2021, up from his earlier estimate of 846,000. 

He also raised his third-quarter delivery estimate to 23,000, "following reports of strong production."

"People often focus on deliveries, but this metric probably gets too much airtime," he said. "We are more interested in margins, which we think could be particularly strong in Q3."

Electric vehicles now represent 12% of trailing three-month vehicle sales in China, followed by 10% in Europe and 3% in the U.S., Potter said. 

Electric-vehicle penetration has trended steadily higher in recent months, especially in Europe and China, he said.

Tesla Chief Executive Elon Musk said in an email over the weekend that this will be the company's “most intense delivery week ever," Electrek reported. Musk thanked Tesla workers for the “hardcore delivery push.”

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Separately, Credit Suisse Dan Levy said he expected third-quarter deliveries to range from 225,000 to 230,000, compared with the sell-side consensus of 223,000. Upside was limited by supply, the analyst said.

Levy has a neutral rating and an $800 price target on Tesla stock.

He said "quarter-end deliveries amid a widening ‘quarterly wave’ is an x-factor (about 60% or more of quarterly deliveries in final month), with Elon Musk reportedly noting the wave is unusually high this quarter due to parts shortages."

Accordingly, he added "a result of 225,000-230,000 would be impressive amid the chip shortage."

"After a sluggish start to the year, Tesla stock has recovered of late, +27% since early June," Levy said. 

"The stock has been resilient, overcoming concerns on China risk, and also performing well in the face of product delays, pressures from the [semiconductor] shortage, and the launch of an investigation on Tesla autopilot by [the National Highway Transportation and Safety Administration]."

While additional positive data points could help the stock, Levy said he was "inclined to believe that potential for further upside for the stock will be defined by Tesla’s success in endeavors outside vehicle sales – specifically on vehicle autonomy."

Musk recently said on Twitter that starting next week, Tesla planned to start adding about 1,000 new full-self-driving beta testers a day based on their “safety score.” 

Meanwhile, Ford  (F) - Get Ford Motor Company Report on Tuesday unveiled plans to build four new U.S.-based manufacturing plants as it accelerates its transition into clean-energy vehicles.

Ford is a holding in Jim Cramer's Action Alerts PLUS member club