Bank of America reiterated a Neutral rating on Tesla (NASDAQ:TSLA) and raised their 12-month price target for the stock to $300.00 (From $225.00) as auto suppliers see higher volumes and lower costs so far in 2023.
Analysts wrote in a note, “Since 2020, the industry, but specifically suppliers, have been starved for volumes, but the tide is turning. So far in 2023, volumes have exceeded expectations, particularly in the US where fleet sales have been robust. Volumes in Europe have surprised to the upside and, while China remains slow, volumes have largely been in line with expectations. Furthermore, raw material and freight costs have eased from highs, which should contribute to higher earnings near-term. Nonetheless, there is still a long way to go before optimal conditions are met in 2024-2026 so this is likely a multi-year call.”
Given these improving dynamics, BofA analysts are expecting strong 2Q results and higher outlooks in 2023, specifically from suppliers. In addition, auto stocks have historically bottomed shortly before the trough in volumes and rise materially in the first few years of a volume recovery. The analysts hold the belief that the automotive industry is presently signaling the conclusion of the downward phase in the cycle, indicating a favorable timing for investment.
Shares of TSLA were down 0.63% in premarket trading on Thursday.