Tesla’s share price target more than doubled at UBS, as longtime skeptics see EV leaders “win” in software

A longtime skeptic of Tesla Inc’s stock, UBS analyst Patrick Hummel, has more than doubled its stock price target and says the story is no longer about the company’s leadership in electric vehicles, it’s about “winning” in software.

Hummel raised its price target to $ 730 from $ 325, while maintaining its rating at neutral. His new target has swung to be 20% above the average target of the 34 analysts surveyed by FactSet – $ 608.58 – from being 46% below it.

He has been neutral at Tesla since March 2020, having been on sale or not rated since at least December 2017.

Tesla’s stock
TSLA,
+ 0.59%

increased by 0.2% in pre-market trade. At Tuesday’s closing price of $ 686.44, the stock fell 28.6% since closing at a record $ 883.09 on January 26.

Hummel said that while older vehicle manufacturers who are now “all-in” on electric vehicles can challenge Tesla’s EV volume leadership, Tesla is still the undisputed technology leader in space, especially in software.

“This is the next battlefield and the most important driving force for valuation from here, in our opinion,” Hummel wrote in a note to customers.

He said becoming one of the largest and most profitable manufacturers of original equipment (OEMs) by 2030 is worth about $ 200 billion in market value for Tesla, in its base case analysis. That leaves more than $ 400 billion in market value for everything else, he said. Tesla’s market capitalization at the end of Tuesday was $ 658.9 billion.

“We believe that the lion’s share of this value can be generated by software, primarily autonomous driving,” Hummel wrote. “With that, Tesla has the potential to become one of the most valuable software companies.”

Tesla’s share has risen 360.4% over the past 12 months, while older OEM General Motors Co. shares
GM,
-0.52%

has received 77.3% and the S&P 500 index
SPX,
-0.36%

has advanced 28.9%.

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