Tesla TSLA Has 30% Upside Potential, Says Wolfe Research, with $360 PT

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A Wolfe Research analyst says Tesla shares have upside potential to $360 per share. He bases his bullish outlook on the Inflation Reduction Act (IRA) and its benefits for the manufacturer.

Tesla shares have already rebounded about 30% from their May low, but a Wolfe Research analyst says the rally is set to continue. The firm's analyst, Rod Lache, recommends Tesla stock as a buy as it has an upside potential of another 30%, to $360 per share.

First of all, his bullish outlook is based on the recently passed “Inflation Reduction Act.” The analyst believes that the IRA will be a blessing for the manufacturer's shares. The analyst wrote:

“Inflation Reduction Act has the potential to affect the entire value chain – significantly changing the trajectory of EV adoption, as well as the competitive landscape and earnings prospects for OEMs and Suppliers.”

Lache predicts that electric vehicles will penetrate 20% of the U.S. over the next three years. This is a significant revision of his views, as he was previously convinced that by 2025 penetration would be 10%.

The IRA is offering a $7,500 tax credit on all new U.S.-made electric vehicles through 2032. Lache expects Tesla and its customers to receive about $11 billion in incentives. The analyst added:

“We believe this development is far from fully appreciated. By 2025, the U.S. government may be directing incentives worth close to $11 billion to TSLA and their customers. We expect this to almost certainly influence OEM profitability.”

He predicts Tesla will increase its earnings to $16 per share by 2025, up from his earlier estimate of $12.70.

© 2022, Eva Fox | Tesmanian. All rights reserved.

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Eva Fox holds zero shares of Tesla, Inc., and currently (at the time of this article's publishing) holds zero options or securities in Tesla Inc. and/or its affiliates.