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Piper Sandler ups Tesla price target, but warns of vehicle price cuts ahead

Piper Sandler is continuing to bet on Tesla despite likely price cuts to the company’s vehicles over the next year. Analyst Alexander Potter upped the firm’s price target to $360 from $344 a share in a note to clients Thursday. He said that while a price cut to Tesla’s cars may signal a demand issue to some investors, it’s actually a measure in helping the company address its backlog problems. “In other words: Tesla is striving for higher production, shorter wait times, and lower prices,” Potter wrote. “Investors should be rooting for this outcome – not dreading it – because even after recent improvement in some regions, most consumers must still wait too long (3-5 months) to receive their vehicles.” In recent months Tesla has struggled to ramp up production in its newer car factories in Texas and Berlin as it grapples with supply chain problems, with CEO Elon Musk calling both facilities “gigantic money furnaces” in an interview earlier this year . At the same time, Tesla was also forced to temporarily halt most production at its Shanghai factory amid Covid-19 restrictions in China. That said, Potter believes that recent upgrades to Tesla’s Shanghai facility should unlock more production capacity for the electric vehicle maker, with Piper Sandler expecting the factory to produce roughly a million units annually. “Faster production equates to shorter wait times,” Potter wrote. “Eventually Tesla may cut price in order to refill the backlog, but if so, this would be an intentional, offensive decision.” Piper Sandler’s revised price target also takes into account the 25% price increase recently announced by Tesla for its full self-driving software package. Shares of Tesla have toppled more than 21% this year, but Piper Sandler’s fresh price target implies that the stock could rally nearly 30% from Thursday’s close. — CNBC’s Michael Bloom contributed reporting

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