Tesla Shares Rally on Infrastructure Bill
Our view for the company is unchanged and we maintain our $570 per share fair value estimate and narrow moat rating.
On July 29, Tesla (TSLA) shares rallied nearly 5% at the time of writing on the news that the U.S. infrastructure bill was advancing in the Senate. The bill features $7.5 billion of funds that would be used to build 500,000 high powered electric vehicle chargers throughout the country. We had expected this to occur and had already incorporated this into our outlook for EV adoption and subsequently lithium demand, lithium prices, and producer profits. With our outlook unchanged, we maintain our $570 per share fair value estimate and narrow moat rating for Tesla.
At current prices, we view Tesla as slightly overvalued on a risk adjusted basis, with the stock trading in 3-star territory but a little less than 20% above our fair value estimate for the very high uncertainty name.
We recently doubled our outlook for U.S. EV adoption to 30% of new auto sales by 2030 from our previous forecast of 15%. The biggest driver behind our increase was the buildout of more chargers through the U.S. to 1.25 million public chargers by 2030, from a little over 100,000 in 2020. This should alleviate road trip anxiety, or the consumer fear that an EV will not work on road trips, due to largely to a lack of places to charge. As more EV chargers are visible at stops along highways, we see a change in consumer perception about a lack of charging infrastructure. In turn, this should drive more consumers to consider an EV, including a Tesla.
However, Tesla has its own charging network and uses a different charging connector than other EV chargers. Management has said it will open Tesla chargers to allow other EVs to charge at a Tesla location by installing converters. As such, it is possible that Tesla is able to secure some of the grant funding for the 500,000 chargers, which would help the company continue to expand its charging network, reducing future capital expenditure needs. If Tesla were to win a substantial portion of the grants, we would revisit our fair value estimate.
|Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.|
Seth Goldstein does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.