By Cody Miecnikowski
After soaring over 40% in the last three and half months, analysts are continuing to rally behind Tesla Motors Inc (NASDAQ:TSLA).The electric-car maker’s ambitions are huge, and high expectations have helped drive Tesla’s market capitalization to an impressive $33.5 billion. In an annual general meeting last week, Tesla CEO Elon Musk excited investors with an abundance of updates. The launch of its first SUV, the Model X, insights on the Model 3, unveiling of a new paint shop, and the retirement of CFO Deepak Ahuja are some of the many catalysts keeping analysts on their feet.
On July 8, Ben Kallo of Robert W. Baird reiterated a Buy rating on Tesla with a $335 price target, citing the recent weakness in the company’s shares as a good buying opportunity.
Kallo’s recommendation came after a visit to Tesla’s Freemont Factory, commenting that the activity there is up to par. He observed that Tesla’s delivery target for the year is on track, reporting, “Tesla continues to methodically ramp production to meet its target of 55k deliveries by year end.”
He adds that the new paint shop in the Freemont Factory will be “the most advanced paint shop in the world.” The shop will be able to paint up to 10,000 cars per week with the help of 100 robots. Kallo adds that the shop was built in a “record breaking time-frame.”
In regards to the Model X, the analyst remains confident that the SUV will be available for deliveries starting in the third quarter fiscal year 2015. Kallo states, “The Model X will increase TSLA’s brand value and help solidify TSLA as a long-term investment as this will be the third electric vehicle successfully launched by the company.” Kallo reports that investors should buy Tesla stock before the X is officially released.
The fourth electric success for Tesla can potentially be the Model 3. This is a $35,000 full-electric automobile that Kallo expects to be available by 2017. The car will be available in both crossover and sedan variants, and Kallo considers its potential a key long-term growth driver for Tesla. Furthermore, the vehicle is heavily dependent on Tesla’s Freemont facilities and the $5 billion Gigafactory, which is expected to be complete by the middle of 2016.
Kallo states, “It is important to note the Model 3 is much more of a long-term growth driver as it will be a higher-volume vehicle.” He continues, “Although additional capital will be deployed to ramp Model 3 production, many of TSLA’s current investments are to support mass vehicle production (e.g., TSLA’s new paint shop).”
In respect to Mr. Ahuja’s retirement, The CFO announced that he will continue to hold his position until a replacement can be found. In his report, Kallo states that the job is “highly desirable.”
Kallo concludes, “This is the wrong time to pull money out of [Tesla] stock.” He states that the “recent downgrades, which have been largely valuation driven, do not fully value the Model X launch” and many other catalysts pushing Tesla forward.
When measured over a one-year horizon and no benchmark, Ben Kallo has an overall success rate of 56% recommending stocks, earning a +11.4% average return per recommendation. The analyst has rated Tesla a total of 34 times since February 2013,earning an 80% success rate recommending the stock and a +33.1% average return per Tesla recommendation.
In a research note published on July 13, Global Equities Reseach analyst Trip Chowdhry also expressed bullish sentiments on Tesla. In the report, Chowdhry reiterated a Buy rating on the stock with a $385 price target. His analysis is based on a 10x multiple of his 2015 $6.2 billion revenue estimate.
Chowdhry feels that Tesla’s Model X will be a huge success for the company, referring to it as a “phenomenon.” By August, the analyst expects the Model X configuration web page to go live. Furthermore, over 80% of the 540 robots to build the Model X are already installed.
The analyst also notes that Tesla is scheduled to report earnings for the second quarter of fiscal year 2015 on July 30 and believes the company is “very likely” to beat its own second quarter delivery guidance.
When measured over a one-year horizon and no benchmark, Trip Chowdhry has an overall success rate of 87% recommending stocks, earning a +29.4% average return per recommendation. The analyst has rated Tesla a total of 18 times since June 2013 earning a 88% success rate recommending the stock and a +32.9% average return per Tesla recommendation.
Out of 29 analysts polled by TipRanks, 7 analysts are bullish on Tesla, 3 are neutral, and 3 are bearish. The average 12-month price target for Tesla is $295.91, marking a 12.87% potential upside from where stock is currently trading. On average, the all-analyst consensus for Tesla is Hold.