Shares of Tesla (TSLA) are in the spotlight on Monday after Morgan Stanley analyst Adam Jonas raised the firm's price target on the shares to $1,200, citing better-than-expected third quarter results and higher volume assumptions. Meanwhile, Hertz (HTZZ) announced an initial order of 100,000 Tesla vehicles valued at $4.2B in its first big push to electrify the company's fleet since it emerged from bankruptcy proceedings.
MANUFACTURING LEADERSHIP: Morgan Stanley analyst Adam Jonas raised the firm's price target on Tesla to $1,200 from $900, while he reiterated an Overweight rating on the shares following better-than-expected third quarter results. Over the next 12 months, Tesla can demonstrate its manufacturing leadership, a "step change in costs/complexity and higher growth in the vehicle user base," Jonas told investors in a research note. The $1,200 target implies roughly half the company's growth target, a "constrained" China and virtually no autonomy, the analyst added. Jonas noted that the target raise is driven predominantly by higher volume assumptions. His revised volume forecast of 8.1M units, up from 5.8M units, by 2030 implies an annual growth rate of 28%, which is slightly more than half the 50% growth rate targeted by Tesla over the long-term, Jonas highlighted, adding that Tesla is currently growing sales year-over-year by approximately 70%.
VEHICLE ORDER: Hertz has announced an investment to offer "the largest electric vehicle rental fleet in North America," which includes an initial order of 100,000 Tesla vehicles by the end of 2022 and new EV charging infrastructure across the company's operations, the rental company said. In addition, Hertz is teaming up with Tom Brady "to showcase how it is making EV rentals fast, seamless and more accessible, as the company accelerates its commitment to lead the future of mobility and travel."
Beginning in early November and expanding through year end, customers will be able to rent a Tesla Model 3 at Hertz airport and neighborhood locations in U.S. major markets and select cities in Europe, the company said in a statement. With the current order, electric vehicle will comprise more than 20% of Hertz global fleet and is expected to be supported by a combination of Level 2 and DC fast charging in approximately 65 markets by the end of 2022 and more than 100 markets by the end of 2023. Hertz added that "these ambitions could be affected by factors outside of Hertz's control, such as semiconductor chip shortages or other constraints."
The "single-largest purchase ever" for electric vehicles represents about $4.2B of revenue for Tesla, according to Bloomberg's Erik Schatzker, citing people familiar with the matter. While car rental companies typically demand big discounts from automakers, the size of the order implies that Hertz is paying close to list prices, Schatzker stated.
PRICE ACTION: In Monday morning trading, shares of Tesla have jumped about 7% to $970.45.