Analysts upgrade Tesla’s stock to ‘buy’ on the heels of revamped EV tax credits

Industry analysts say now is the time to invest in Tesla, as the company is expected to reap the benefits of the Inflation Reduction Act faster than its competitors.

Wolfe Research upgraded  shares of Tesla over the holiday weekend to ‘outperform’ from ‘peer perform.’ Analyst Rob Lache expects the company and its customers to reap a combined $11 billion in incentives by 2025.

Lache raised his earnings per share estimates for Tesla to $7.40 for 2023, up from $6.12, and $16 for 2025, up from $12.70. He also raised the 12-month price target from $280 to $360, representing a 33% upside from the $270.21 price where Tesla shares closed on Friday. Shares in premarket trading on Tuesday rose 1.2%.

Lache says Tesla is better positioned than its competitors to reap the benefits of the Inflation Reduction Act. The company will easily be able to meet requirements to manufacture or assemble more than 50% of battery components in North America. Tesla already has plants in Reno, Nevada, and Austin, Texas, that will have access to the production tax credit starting in 2023.

“With the passage of the IRA, Tesla’s mid-decade earnings power now appears much stronger,” Lache wrote in a note on Tuesday. “In fact, TSLA may be the only OEM positioned to achieve the full $7,500 Purchase Credit for the vehicles that they sell in the US before mid-decade.”

Lache added that EV makers “should become more profitable than manufacturers of [internal combustion engine] vehicles; a 180-degree reversal from current expectations.”

“As we sat down to outline this report over the past few days, our main takeaway was clear: The Inflation Reduction Act stands out as far and away the most consequential development for the US auto industry that we’ve seen in a very long time,” Lache wrote.

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