Tesla shares climbed as much as 1.4% in after-hours trading Tuesday after closing the regular session up 7.2%. If Tesla market value is able to sustain $100 billion for months, the CEO Elon Musk is going to be due for a huge payout.
Musk, Tesla’s billionaire chief executive officer, is eligible to receive the first tranche of an all-or-nothing pay award if the company’s market value stays above $100 billion for a sustained period. On paper, the first chunk of the award would net him about $346 million.
Wall Street’s most bullish analyst on Tesla was behind Tuesday’s rally. New Street Research analyst Pierre Ferragu predicted the company will sell 2 million to 3 million cars per year after 2025 at industry-leading margins. He raised his price target by $270 to $800, the highest among analysts surveyed by Bloomberg.
New Street’s lead Tesla analyst, Pierre Ferragu, noted that he initiated coverage of Tesla in May 2018 with a $530 price target and that over that time, the main points in his thesis had been validated. Specifically, Tesla achieved 40% improvements in cost, range and performance over the past seven years, according to Ferragu, and the Model 3 is taking share in the premium vehicle market. Ferragu believes that as consumers trade up to Tesla’s premium vehicles, the company’s ultimate addressable market is around 20 million units, leaving plenty of room for growth.
“We stick to our views and expect Tesla to sell 2-3 million cars per year after 2025, at industry leading margins, justifying a market capitalization of $230-350 billion, or ~$1,100-1,700 per share,” Ferragu wrote. Discounting that back to early 2021 yields a stock in the $640-$960 range, justifying the increase in the price target, which represents about 56% upside to Tesla’s current share price.