Tesla (TSLA) bulls shouldn't get too comfy with the company's market dominance continuing unabated, warns Guggenheim analyst Ali Faghri.
"Our balanced view [on Tesla] is based on: 1) a favorable near-term setup — with demand outpacing supply, we see visibility to volume upside in 2022 and 2023 as new factories in Austin and Berlin ramp; 2) competitive advantage over all original equipment manufacturers today, including a high degree of vertical integration, a software defined vehicle approach, a dedicated charging network, and greater battery capacity; 3) increasing competition, from both legacy players and new EV-only entrants, and as a result, we see risk of moderating global EV share for Tesla from current lofty levels (especially post 2023 as competitors scale capacity)," explained Faghri in a note to clients on Monday.
Faghri initiated coverage on Tesla at a Neutral rating with a $925 price target.
Tesla shares currently trade at $902, down 20% over the past month as CEO Elon Musk has sold large chunks of stock to satisfy tax obligations. Musk has unloaded nearly $12 billion worth of Tesla's stock since Nov. 8.
To Faghri's thesis on Tesla, it does appear the company has already lost market share as legacy automakers begin their foray into the hot electric vehicle market.
Tesla held 66.3% of EV registrations in the second quarter of this year, lower than the 79.5% it held one year ago, according to data from Experian. GM-owned Chevrolet saw its share of EV registrations rise to 9.6% from 8.3% a year earlier. Ford, Nissan and Audi also picked up market share in the EV industry, per Experian's data.
Continued Faghri, "We expect electric vehicles (EVs) to reach 14% of global sales by 2025 and 36% by 2030, representing an ~30% compound annual growth rate over the next decade. EV adoption will be driven primarily by tightening global emissions regulations and increased commitment by legacy automakers to electrification. We also see improving cost of ownership and vehicle performance/safety benefits as key drivers of growing penetration of EVs globally."
The analyst initiated coverage of Tesla rival Lucid with a Neutral as well. Price target: $38, relatively in line with current trading levels.
But Faghri isn't totally down on Tesla, as he outlined an upside price target of $1,963.
"Further traction with AV/robo-taxi efforts, delivering on extraordinary battery cost improvement targets, and potential for a high volume ‘Model 2’ in the $25k price range," said Faghri on what it would take to become more bullish on Tesla's stock.