Jefferies raises Tesla’s price target to $2,500 ‘street high' ahead of Battery Day

Jefferies is raising Tesla’s price target to a ‘street high’ of $2,500, or $500 after the 1-5 split, with the firm noting that "nothing matters more than comprehending how the 'Millionmile' batteries could profoundly change the auto business model." The Final Round panel breaks down the details.

Video Transcript

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MYLES UDLAND: All right, welcome back to the Final Round here on Yahoo Finance. Time now for our Call of the Day. Today, we're talking about Jefferies' latest note on shares of Tesla. The firm maintaining a buy rating and raising their price target on the stock to $2,500 per share.

Now, Tesla shares will split at the end of the week. So, really, this is a $500 per share price target I guess if you can see this video in a week or so. That's an upside, or that's raising their price target, I should say, from $1,200 previously. So more than doubling the expected value for Tesla here.

And Seana, I think it kind of speaks to a theme we've seen from a number of analysts covering a number of different companies, which is, I wouldn't quite call it capitulation. But certainly there is a backfitting of, OK, this stock that I was really bullish on is now way above my target price. And I am now going to slightly tweak my thoughts on it but remain even more bullish and raise my price target even further above where the stock has risen to.

SEANA SMITH: Yeah, Myles, I feel like every day, we're covering another analyst that is so much chasing the stock here, because it's been moving so much to the upside. It simply can't keep up. And this is exactly what is the case for Jefferies, because their price target, like you said before, this was $1,200 a share. So they're more than doubling it.

And when you take a look at the call and really try to figure out the argument that's being made, I think it's hard to argue that the fundamentals have really changed. It's almost a valuation call. They're chasing the stock when you drill down to it. I don't think there's much has changed about the fundamentals. And I think you can make that argument.

A lot of the calls that we are buying on the street, not only on Tesla, but a lot of the other needs that have performed extremely well over the last three or four months. When it comes to this call, though, it was interesting what this analyst from Jefferies pointed out, because one of the things he mentioned was growth expectation.

And in that, he was saying that he still sees logic in this exuberance because of the growth expectation-- growth expectations for 2020 to 2022 and doubling since last September. So he was pointing to the growth there. And then also just the fact that Tesla has executed much better than many had expected during the pandemic.

I think the fact that the pandemic shut down some of its factories. The fact that maybe there wasn't going to be that demand there on the buyer side, Tesla was able to navigate that tumultuous time. And we're still going through it much better than I think many on the street had anticipated. So that, of course, is adding to the bull case here for Tesla.

And then in terms of future growth, a lot of it has to do with Tesla's battery business. And we've been talking to a couple of analysts here on The Final Round. And a lot of them have been focusing more and more away from Tesla's auto business and more so to its battery business and what it can do there. So we have the battery day coming up on September 22.

And in terms of what to expect, this Jefferies analyst saying that it will set new benchmarks and ambitions to lead the packed cost. So that's the really important point here. It's less than $100 in the coming year. And then also the commentary on the million mile battery. I'm still a little bit skeptical about this.

But any idea he's looking for the battery that could last for a million miles is what he is interested in hearing supporters-- if we do get any commentary on that, I'm sure the street will be reacting to that because Elon Musk, we know, loves to make these lofty and pretty-- I guess-- lofty promises. And we'll see if the bulls are able to justify what he's promising.

But, again, this is a stock that has risen, what, over 400% so far this year. So I think this is just another case of an analyst trying to chase the gains that we've seen so far this year, and, therefore, doubling a price target that he had all the way to $2,500 a share.

DAN ROBERTS: Well, Seana, it's interesting. You say nothing has fundamentally changed. And, yet, it seems to me like, quite recently, the analyst's narrative has changed and shifted, because this is the second note in a few weeks that we've discussed where the analyst is focusing away from just car sales and talking about software and dare I say services.

Here we are again, like we heard so much about with Apple and then, of course, batteries, as you mentioned. It was funny to me when this note said, you know, that Tesla's competitive advantage in actual auto sales might be shrinking. But then they've got the software and the batteries to fall back on.

You know, I hadn't necessarily seen or heard of any compelling numbers that show that any other carmaker yet was really challenging Tesla on the EV side. I know many others have some models coming out. But it seems to me like it's still the sort of go-to prestige name in EVs.

But fine. If you think that the car sales are going to have an issue, you can focus on the software and services. And in many ways, it feels a little bit like the Apple comparisons when people thought that iPhone sales were an issue and were potentially flagging. They said, well, but Apple has the ecosystem and the services.

And now that we're approaching the arrival of that 5G phone, people are shifting back to say, well, great, the iPhone sales because that's what matters. So you can talk up the software and talk up the idea of a day when Tesla might be selling its battery to even rival carmakers. That would be a huge business. But for now, it seems to me like, the actual core business is doing pretty damn well, as in it the car sales.

MELODY HAHM: And, I mean, just thinking about the battery component, think about even those with Tesla cars. One of the biggest issues, especially for those outside of California, has been the lack of super chargers, right? When you are on a long road trip, you have to find a way to fuel up.

This idea of the million-mile battery would be a game changer even if you don't think about the possible repercussions from the outside competitive landscape with those players having to rely, perhaps, on Tesla's superior battery. I think one thing that really stood out to me and Jeffries is very self-aware, right, is that when they initiated coverage on Tesla, in September 2017, three years ago, the note was titled Permanent Revolution, which is literally the exact title of the note we're looking at today. Permanent revolution continues.

And I think to kind of to sum up what all of us have been talking about, the core fundamentals, the lofty goals that Elon Musk have first sort of set out years ago-- they're actually coming to fruition. And I think because analysts for so long didn't believe in operational excellence from the brand. They believed in the vision, perhaps. They believed in some of these pipe dreams that were coming out of the Muskian empire.

But in reality, they were not able to fulfill a lot of those demands. Even the skepticism surrounding the Shanghai gigafactory for so long, honestly Musk kind of just proved that, right? They were pretty much up and running when they said they would after a short delay and then were quickly able to sort of rebound even amid the coronavirus pandemic.

So, again, I think the bar maybe was quite low because these ambitions seemed so kind of out of reach for people who are looking at sort of the financials of this. But ultimately the core concept and the core strategy is the same. It's just back then, it was an undervalued play. And now, it seems like there's more room to run.

MYLES UDLAND: Yeah, I think, Mel, that, that kind of speaks to the entire style of investing that's done well. And the last decade has been what companies are growing quickly? And what companies have this huge opportunity? And I think a lot of people spent a lot of time in the last decade saying, well, financials don't make sense to me. I don't like the numbers here. People were shorting Amazon all the way and Tesla all the way. And they're not exactly analogous.

But the people who just said, well, they're going to be bigger. It's fine. They made a lot of money, like a lot, a lot of money. And I think we see that trade. People are catching up to that trade even today. And then that's obviously what's fueling this market today, the last few months, and obviously the last--