Stifel: We Like Tesla, The Model X And Energy Storage

Tesla Motors Inc TSLA investors and analysts are still talking about the upcoming Model X and Model 3 even after earnings were released earlier this month. On May 15, analyst James Albertine of Stifel Nicolaus reiterated a Buy rating on TSLA with a $400 price target. Shares last closed at $244.

Tesla’s Model X is scheduled to be released this summer. The all-wheel-drive crossover SUV will be cheaper than the Model S. Albertine is maintaining his 4Q15 estimate of 4,500 Model X deliveries. He added, “We believe the ‘playbook’ for the Model X production ramp is the Model S ramp circa 2012-2014, less some assumptions for efficiencies of scale, customer awareness, and improved state of production.”

Furthermore, Tesla fans are excited for the release of the Model 3, which is expected to come out next March and be available for regular purchase in 2017. At $35,000 the Model 3 will be the most affordable Tesla. Investors hope that the Model 3 will fill the void of an affordable, small, electric vehicle and boost vehicle sales.

James Albertine is bullish on Tesla due to “the pull forward of investments in future vehicles, production capabilities, alternative industries, and ultimately in the establishment of TSLA as an energy storage company relative to an auto manufacturer.” Albertine is referring to Tesla’s recent announcement to enter the energy storage sector with its home battery product; Powerwall. Powerwall will be charged through solar panels and will be equipped to power homes at night as well as provide backup electricity in the event of a power outage.

Although Albertine is ultimately bullish on Tesla’s energy products, he warns against “anticipating a material near term” increase in earnings per share. Long term, Albertine believes Tesla can penetrate “a market that could conceivably approach 1 to 4 million households globally in the next 5 to 7 years.”

Albertine attributes his $400 price target to the following near-term catalysts: “progress made on further Model S sales globally; the ramp in the Model X; construction of the Gigafactory driving lower battery production costs; TSLA’s entry into the stationary storage business and the further proliferation of TSLA retail stores; service centers and charging stations internationally.” The analyst concluded, “Our $400 target price anticipates that as management successfully methodically achieves each of these milestones investors will ascribe additional credit for long-term sales/production targets, which when applied to a discounted cash flow analysis render our $400 target price as reasonable and achievable near term.”

James Albertine has rated Tesla 19 times since August 2013, earning a 90 percent success rate recommending the stock with a +14.9 percent average return per TSLA rating. On average, the top analyst consensus for Tesla on TipRanks is Moderate Buy.

Albertine has rated many other stocks in the automobile industry such as CarMax, Inc KMX and General Motors Company GM. He has rated CarMax 5 times since December 2013, earning a 60 percent success rate recommending the stock with a +7.7 percent average return per KMX rating. Albertine has rated GM 5 times since September 2013. However, he does not have an average return for the stock since he has only issued Hold or Neutral ratings.

Overall, Albertine has an 81 percent success rate recommending stocks with a +17.3 percent average return per recommendation.