Deutsche Bank 'encouraged' by Tesla following tour of Texas Gigafactory

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Deutsche Bank reiterated a Buy rating on Tesla (NASDAQ:TSLA) and maintained their 12-month price target on the stock at $200.00 after hosting investors in Austin for a guided tour of the electric automaker’s Texas Gigaplant. They also held meetings with the company’s Head of IR Martin Viecha and Director Travis Axelrod.

Analysts were, once again, impressed with the plant, which they say is “well designed and runs very efficiently, and is clearly making good progress in ramping up both vehicles and battery cells volumes, and in installing tooling for Cybertruck.”

Tesla stated that these developments are expected to lead to cost reductions, with benefits such as the reduction of expenses associated with initial factory setup, decreased raw material prices, utilization of IRA credits, supplier negotiations, and the re-engineering of components.

At the same time, the company reiterated that the environment could get more challenging in the next 12 months, and that the company remains committed to growing volume as long as it generates positive free cash flow.

The analysts wrote in a note, “All in, we came away encouraged that Tesla could deliver cost improvements and efficiencies in the quarter ahead which may help offset some of the pressures, but we still worry the company may have to take additional price cuts in a weakening environment, which could put further pressure on earnings. Mid-term, Tesla confirmed that it is working on developing two new models on its next-gen platform and represent its highest priority at present. We are also encouraged by the targeted combined unit volume of 5 million and we remain bullish on the opportunity presented within the next-gen platform.”

Tesla also confirmed that the company is open to trying advertising and that, although the topic of advertising came up during this week’s annual shareholder meeting and received warm reception from the audience, this has been contemplated upon internally by the team for several months already.

Tesla believes its main advertising challenge is with auto consumers’ awareness around battery life and charging capabilities and durability. This issue of awareness exists even in high EV-saturation areas like California which implies there could be even more room to improve elsewhere in the country. With that said, the company indicated that it’s still early days and it will need to be thoughtful about the exact channel and strategy.

Shares of TSLA are up 0.57% in premarket trading on Friday.