Yahoo Finance Tesla ‘is entering a new growth phase': Analyst
Electrical vehicle (EV) maker Tesla (TSLA) is one of the markets best secular growth stories, according to CFRA Analyst Garrett Nelson.
"That's important at a time where growth is really being hurt by inflationary impacts," Nelson told Yahoo Finance Live.
"[Tesla's] is a story that's not immune to inflation, but the growth is really driven by company specific factors: The growth for electric vehicles and also the startup of two new factories, one in Germany, [which] just held the ribbon cutting. And then, in Texas, where they have a grand opening scheduled two weeks from now," Nelson said.
"They're entering really a new growth phase with the startup of these two new factories that will increase their annual vehicle production capacity dramatically. And so that's what's really driving the earnings growth going forward," he added. "Over time, they can really scale up with these larger factories. It really takes time. It's several month process to scale up to full capacity," he added.
Nelson said Tesla's strategy is to do whatever it takes to boost production. "They have a goal of increasing their annual auto sales from about a half million vehicles sold in 2020, to 20 million by the year 2030. So, that's growth of 40x that needs to happen. And so, they're going to have to really accelerate their growth by building new factories. The Texas and Germany factories essentially doubles their number of operating factories from two to four. And we believe they're looking at other factories around the world," he said.
Building factories around the world "is really going to help Tesla's growth in other markets, and achieve economies of scale, which should help drive down costs," Nelson said.
'Setting investor expectations'
Nelson, who upgraded the stocks from Hold to Buy in January, believes that the automaker's goals are within reach.
"Tesla has become very good at setting investor expectations. That's why company has now beat earnings nine of the last 10 quarters," he said.
In Tesla's latest earnings report, revenue rose 65% year over year in the quarter, while the automotive revenue totaled $15.97 billion, up 71%, according to a press statement.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter: @daniromerotv
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