Tesla: The Street's Talking…Again
Tuesday was a busy day for Wall Street analysts who cover shares of Tesla Motors Inc (NASDAQ: TSLA), as Jefferies initiated coverage with a Buy rating and $350 price target. Morgan Stanley commented on the company's battery opportunity, while Pacific Crest updated its model to reflect the positive March-quarter pre-announcement.
Jefferies: ‘Ample' Pent-Up Demand For 500K Teslas Per Year By 2020
In a report published Tuesday, Jefferies analyst Dan Dolev initiated coverage of Tesla with a Buy rating and $350 price target as a proprietary survey uncovered "ample" pent up demand for Tesla to deliver 500,000 vehicles per year by 2020 in NA/WE alone.
According to Dolev's survey, 68 percent of 700 respondents indicated they are considering alternative fuel vehicles, while 7 percent of respondents are considering purchasing a Tesla.
The analyst stated that Tesla's prior guidance of selling 500,000 vehicles a year by 2020 is "feasible," as its share of the market would be less than 0.5 percent of expected 2020 global light vehicle sales.
Dolev also noted that Tesla has a "distinct" competitive advantage in the form of its battery, as the company's "relentless" drive to improve battery energy storage capacity, longevity, power delivery and performance while lowering cost per kilowatt-hour will translate to Tesla evolving into new markets, products and services over time.
Morgan Stanley: Tesla's Battery Opportunity Expands Total Addressable Market And ‘Imagination'
In a report published Tuesday, Morgan Stanley analyst Adam Jonas discussed Tesla's batter opportunity, noting the company has "significant optionality."
According to Jonas, Tesla's "quest" to disrupt a multi-trillion-dollar global car industry offers an adjacent opportunity to also disrupt the trillion-dollar electric industry. As such, investors will need to permanently change the way they view Tesla as a franchise and a stock.
"Much of our discussions with investors over the past year on the topic of energy storage were limited by a lack of tangible proof of concept and commercial reality that one could include in their earnings forecast and/or valuation model," Jonas wrote.
"This appears to be changing."
Jonas continued that a successful Model S and Model X creates a "100 percent captive ecosystem" for Tesla to begin serving the electric power generation and distribution market. The analyst added that many companies are already engaged in the grid storage "space race" –- the missing piece in the renewable energy puzzle.
Bottom line, within five to 10 years, Tesla's battery products could add $40 to $90 per share in value. However, transportation and mobility will remain "overwhelmingly the needle mover" for Tesla over time.
Shares remain Overweight rated with an unchanged $280 price target.
Pacific Crest: Updating Model
Pacific Crest analyst Brad Erickson, meanwhile, updated his Tesla models as misconceptions of both falling lead times on Tesla's website and bigger discounts of show-room models are incorrectly leading some to conclude that Model S demand is "waning."
"We continue to believe there is skepticism built into the name squarely around the car business, even as Tesla has bounced over 25 percent off its lows in late March owed largely to storage," Erickson wrote. "We believe the company left itself a cushion in Q1 on the gross margin side of the business by slightly stepping off production run rates."
Based on feedback Erickson received from Tesla sales center, the analyst is now expecting Tesla to report an earnings per share of $(0.36) in the first quarter, an improvement from his prior estimate of $(0.44). The company is now expected to report revenue of $1.0194 billion, also an improvement from his previous estimate of $967.6 million.
Shares remain Overweight rated with an unchanged $293 price target.
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