Forget the Hertz Deal. Buy Tesla Stock Because Drivers Don’t Want Other EVs.

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Piper Sandler analyst Alexander Potter has raised his

Tesla stock price target, like many others this week. Potter, however, isn’t focused on Tesla’s $4 billion deal with rental car company

Hertz, which plans to order 100,000 Teslas by the end of 2022. He sees other, bigger, reasons for increasing Tesla value.

Potter raised his price target to $1,300 a share from $1,200 in a Wednesday evening report. “Rather than re-hashing the quarter, or ‘piling on’ to the bullishness following a big order from Hertz, we prefer to focus on three other insights that we think are getting overlooked,” he wrote.

His three reasons: Sales of EVs from other manufacturers are underperforming, Tesla vehicles are simply very good cars, and Tesla’s deferred revenue will help profit margins.

The first two factors are most important. “Every [Tesla] bear thesis includes commentary regarding the likely impact of future competition,” writes Potter. But the

Volkswagen (VOW.Germany) ID.4 and

Ford Motor (F) Mustang Mach E haven’t derailed Tesla sales. “These vehicles have not matched Tesla’s post-launch performance, even though Tesla’s pricing is often higher than peers.”

Teslas are attractive to buyers, partly because they are solid vehicles. Potter points out that warranty costs are low, while Tesla used car values are also high. That’s partly due to strong demand for EVs, and partly because EVs are turning out to be cheaper to operate than gas-powered vehicles.

Potter’s new price target is the highest on Wall Street, eclipsing the $1,298 from New Street Research analyst Pierre Ferragu. Tesla stock closed at $1,037.86 on Wednesday. The top 10 Tesla price targets now average about $1,146 a share. The bulls are bullish, while Tesla bears are still bearish: The bottom 10 price targets average about $366 a share.

Bears have been raising price targets, too, following Tesla’s strong deliveries, strong earnings, and the Hertz deal, but have been doing so more slowly than the bulls. Since the end of September, the top 10 price targets are up $132 a share, while the bottom 10 targets have climbed about $89 a share.

Tesla stock rose another 2.6% in premarket trading on Thursday.

S&P 500
and

Dow Jones Industrial Average
futures are up about 0.3% and 0.2%, respectively. Coming into Thursday, Tesla stock was up about 34% so far in October.

The October jump pushed Tesla past $1 trillion in market capitalization.

Write to Al Root at [email protected]