- Tesla bulls expect the stock to hit $4,000 in the years to come.
- The surprising growth of Gigafactories and its big win in Germany can be a big catalyst for it.
- The company has been growing faster than most tech giants in their early days.
Tesla (NASDAQ:TSLA) bulls, like Ark Investment CEO Catherine Wood, have consistently maintained a high target of up to $4,000 for the Tesla stock. The rapid expansion of Gigafactories worldwide could be a major catalyst for the stock’s long-term trajectory.
Merely days after the Gigafactory officially began production in China, a Tesmanian report reveals that Germany’s Brandenburg approved the highly anticipated Gigafactory 4 purchase contract.
Tesla’s (TSLA) Explosive Growth
As CCN.com reported last week, Tesla reached an $80 billion valuation following a strong six months since July 2019.
While the carmaker has similar numbers as Apple and Amazon in their early days when both firms were worth $80 billion, its net profit remains substantially lower.
However, analysts including Kevin Rooke cited the exponential rate of growth and larger growth potential of Tesla as reasons to justify the firm’s current valuation.
Growth and margin expansion will define the future of Tesla’s valuation. Right now, Tesla’s margins are lower than all the companies mentioned above, but their growth rate is higher than them all too.
The rapid progress of Tesla’s Gigafactories and the speed in which they are being built accurately depict how fast Tesla is expanding as a car maker, foremost, and also as a software company.
Tesla has been completing the construction of Gigafactories than other multi-billion dollar conglomerates that specialize in manufacturing, like traditional chip makers.
The speedy launch of a Gigafactory enables Tesla to further position itself as an international automaker, as it allows the company to target individual markets.
Why Gigafactory is key
In China, for instance, Tesla has received government subsidies and tax cuts from the Chinese government for manufacturing its cars out of China.
It is also expected to lower the pricing of its cars by lowering its cost production with local suppliers, which would make its vehicles more attractive to local consumers.
The same will happen with the Gigafactory 4 in Germany. It targets the production of around 500,000 vehicles every year and with the construction site at the GF4 forest approved, the building of the factory has already started.
If 2019’s narrative has been around whether the carmaker is able to meet its sales expectations, the main narrative in 2020 will be around the performance of Tesla’s Gigafactories in China and Germany.
Local analysts, like pro-China newspaper Global Times chief editor Hu Xijin said that Tesla is expected to sell a significant amount of its models in China in the years to come.
Throughout the past year, Wood said that bears were “stretching to make a negative case.” The Tesla stock was consistently the most shorted among other major car makers by a factor of nearly ten.
But, the selling pressure from the shorters of the stock ironically turned into buying demand as many shorts were squeezed out due to the strong performance of Tesla in the past year.