Here’s an item that caught my eye over the weekend. A column in Barron’s makes the case for Tesla shares rising largely because of the high quality of the automobiles it manufactures, and the growing realization that consumers apparently prefer Tesla vehicles over EVs offered by its competitors.
“Piper Sandler analyst Alexander Potter has raised his Tesla stock price target, like many others this week. Potter, however, isn’t focused on Tesla’s $4 billion deal with rental car company Hertz , which plans to order 100,000 Tesla’s by the end of 2022. He sees other, bigger, reasons for increasing Tesla value. Potter raised his price target to $1,300 a share from $1,200 in a Wednesday evening report,” writes Al Root of Barron’s. “His three reasons: Sales of EVs from other manufacturers are underperforming, Tesla vehicles are simply very good cars, and Tesla’s deferred revenue will help profit margins.”
From my perspective, the bullish outlook on Tesla makes good sense. If you’ve driven a Tesla, you know they are great cars and totally unlike anything you’ve driven before. When Tesla CEO and co-founder Elon Musk says his cars are game changers, he isn’t exaggerating. Tesla is truly a pioneering enterprise -- people sense the energy and excitement, and those positive emotional responses drive sales.
Clearly, Musk remembers the days when new cars were thrilling and fun to drive. That’s a memory that the traditional carmakers have apparently forgotten. Will the legacy automobile manufacturers catch up to Tesla?
Frankly, I don’t think they will – at least not in terms of inspiration and innovation. For the time being Tesla has a lock on our imagination. For a consumer product, that kind of image usually translates in increasing sales and higher profits. That’s why investors are bullish on Tesla – they see a winner.
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