EV Stocks Are On Fire, and Tesla Is Worth $400B. Here’s Why.
There is no stopping electric vehicle stocks these days.
EV stocks Barron’s tracks rose about 6% Wednesday, led by an incredible 28% gain in shares of Chinese EV maker Li Auto (ticker: LI).
The Wednesday gain of 6% is great, but looks paltry compared with the average 38% climb posted by the same EV stocks so far in August. The stock market is up too, but nothing like the gains of the EV stocks. The S&P 500 and Dow Jones Industrial Average are up about 6% and 7%, respectively.
What’s going on? For starters, analysts are raising price targets and upgrading shares. NIO (NIO) stock, for instance, has been upgraded twice in two days. UBS analyst Paul Gong took his NIO target from $1 all the way to $16 a share. Li also got its first two analyst ratings this week—both ratings are Buy.
Then there is Tesla (TSLA). It’s the EV behemoth that has helped catalyze the rally in the entire sector. Jefferies analyst Philippe Houchois increased his Street-high price target to $2,500 Wednesday. And investors continue to be excited about Friday’s stock split, Tesla’s potential inclusion in the S&P 500, and its coming battery technology day scheduled for Sept. 22.
Tesla shares closed up 6.4% to $2,153.17 on Wednesday, giving the world’s most valuable car company a market capitalization north of $400 billion. The company is more valuable than Johnson & Johnson (JNJ), making it the eighth most valuable company in America.
And there is more going on the world of electric vehicles.
On Wall Street, activity begets more activity. And there is a lot of capital market activity in the EV space lately. Li Auto recently went public. Several special purpose acquisition companies, or SPACs, have bought EV startups. Xpeng (XPEV) is expected to price its IPO Wednesday evening. Reports indicate pricing will exceed $13, the top end of its expected range. Investors want more EV exposure.
Year to date, EV stocks are up about 340%. The number a few days ago was about 250%. Whether they are up too high is anyone’s guess.
Write to Al Root at allen.root@dowjones.com
Apple Stock Could Hit $600. One Analyst Explains Why.
Another day, another new Wall Street-high target for Apple stock.
On Monday, Morgan Stanley’s Katy Huberty jumped to the front of the pack, setting a price target of $520. On Tuesday, Cowen’s Krish Sankar leapt past her, setting a target of $530.
And on Wednesday, Apple uber-bull Dan Ives outdid them all, lifting his target to $600 from $515.
Ives won’t be the last Apple analyst to move up expectations—the average Apple target price is about $428, and the stock is a hair over $500. But his aggressive move certainly is eye-opening, implying a potential market value for Apple shares above $2.5 trillion.
In his research note, Ives makes the same case he has been laying out for months. He thinks Apple has a “once in a decade” chance to drive 350 million iPhone upgrades over the next 12 to 18 months as the company rolls out the first generation of 5G handsets in the coming weeks. He says that China remains a key ingredient, likely to account for about 20% of iPhone upgrades over the next year.
Ives writes that there has been “considerable strength from the China region over the last few months, with positive trends heading into the fall, an impressive trajectory we expect to continue heading into the next 6 to 9 months.” Meanwhile, he contends that President Trump’s recent executive order barring companies from doing business with TenCent’s (0700.Hong Kong) WeChat won’t impact Apple in China.
The analyst says that checks with the Asia supply chain “show a discernible uptick in forecasts for iPhone 12, which bodes well for demand trends heading into this highly anticipated October launch.” Ives concludes that “many on the Street are underestimating the massive pent-up demand around this supercycle for Apple, which remains the opportunity for the bulls heading into 2021 as this monetization engine heads into its next gear.”
Ives also has a habit of setting not only a price target, but also a “bull case” target for Apple shares. He moved up his bull case by $100, to $700. “We maintain our Outperform rating with Apple being our favorite name to play the 5G theme and strongly believe a further re-rating of Apple’s stock is on the horizon as Cupertino heads into this transformational iPhone product cycle.”
Apple shares were up 0.6% to $502.32 near midday Wednesday. The Dow Jones Industrial Average was down 0.3%.
Write to Eric J. Savitz at eric.savitz@barrons.com