Tesla (TSLA) has dealt California a big blow by moving its headquarters from the cutting-edge manufacturing and technology hub of Silicon Valley to Texas, according to Bloomberg. The electric vehicle giant joins the likes of Oracle (ORCL), Hewlett Packard Enterprise (HPE), and Charles Schwab (SCHW) in relocating to cheaper, more tax-friendly states. TSLA shares fell 1.02% to close at $785.49 on October 8.
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Tesla CEO Elon Musk has clashed with local public officials in California over lockdown policies during the pandemic. While the executive maintains they are not leaving the state entirely and will continue to maintain a large presence, Texas is seen as an attractive prospect with more growth opportunities.
Expansion in California has become problematic for Tesla given the limited space to build around the Fremont factory, where workers and equipment remain jammed. Additionally, a housing problem in the state forces many people to come to work from far away. (See Top Smart Score Stocks on TipRanks)
Tesla relocating its headquarters to Texas is a big blow to California as the EV giant embodies what the state is all about when it comes to clean energy. Additionally, its brand does not only represent Motor City but Silicon Valley and Hollywood as well, according to David McCuan, Chairman of Sonoma State University.
Recently, Canaccord Genuity analyst Jonathan Dorsheimer reiterated a Buy rating on the stock and raised his price target to $940 from $768, implying 19.67% upside potential to current levels.
The analyst expects Tesla to post strong quarterly delivery numbers and increased gross margins from the Model S and the Made in China Models 3 and Y.
Consensus among analysts is a Hold based on 12 Buys, 7 Holds, and 7 Sells. The average Tesla price target of $691.71 implies 11.94% downside potential to current levels.
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