JPMorgan analyst Ryan Brinkman raised his price target and earnings estimates on Palo Alto, Calif.-based Tesla, following the unveiling of the Gigafactory idea, and the company's ambitious plans to drastically cut the cost of the battery. Brinkman now has a $164 price target on shares, some $70 lower than where the stock is currently trading.
Tesla shares were falling 3.4% to $236.51 in early Monday trade, as global markets were falling on uncertainty in the Ukraine.
"The fleshed out plans instill greater confidence in the firm's ability to reduce battery cost to a level more conducive to competing in more modestly priced segments, which in our view is necessary to support the type of higher production volumes seemingly implied in the current share price," Brinkman wrote in the note. "We consequently raise our volume estimates, to a total of 288K by 2020 vs. 228K prior, and our EPS estimate to $15.43 in 2020 vs. $14.68 prior, on the higher volume partly offset by higher cost of financing and increased operating expense."
This comes following not only the Gigafactory announcement, but a debt offering as well, as Tesla continues to raise capital for the Gigafactory and the company's Gen III model, which CEO Elon Musk has said will cost around $30,000 to $40,000.
Tesla originally planned to raise $1.6 billion from the debt offering, but according to Bloomberg, the company raised $2 billion, due largely to enormous demand.