One of the main drivers of the price target increase from $485 to $515 is Tesla’s Energy business, which he believes is often overlooked by other analysts.
“We are upping our price target and reiterating our Overweight rating after analyzing two poorly-understood aspects of Tesla’s business. These are: 1) the Energy segment and 2) Elon Musk’s compensation,” Potter wrote in a note to investors.
Potter estimates the Energy division could eventually exceed $200 billion per year in revenue and believes Tesla will be able to control at least 1/3 of the market for stationary batteries.
When it comes to CEO Elon Musk’s compensation plan, Potter says it will have an impact on GAAP earnings in the coming quarters as some of the milestones have already been met. On the positive side, the compensation plan has been around for some time so the expenses are known, the impact is more around timing of when they will occur.
Tesla shares have been on an upward trajectory as of late with 5 consecutive days of gains earlier this week, before closing down more than 4% yesterday.
Legal Disclaimer – Mike holds shares of Tesla, Inc. (TSLA) and has no plans to change any positions within 72 hours.