Tesla Motors Inc (TSLA) and Walt Disney Co (DIS) Attract Analysts With Model X and Zootopia

By Gal Goldring 

Analysts are weighing in on automotive company Tesla Motors Inc TSLA and mass media company Walt Disney Co DIS. While one analyst upgraded his Neutral stance on Tesla, the other reiterated an Overweight rating on Walt Disney. Let's take a closer look at why both analysts are bullish on the two household names stocks.

Tesla Motors Inc

Robert W. Baird analyst Ben Kallo upgraded share of Tesla from Neutral to Outperform in light of car production updates. Though one of the recent concerns with Tesla has been its problematic production ramp for its new Model X, Tesla's first crossover utility vehicle, the company assures that this is not due to fundamental issues. Strengthening this further, is the fact that 500 units of this model have already been built in Q4, which mitigates the lack of buildability issues at hand.

Tesla's previous Model S experienced similar concerns when Tesla first integrated the model, and since its release in 2012, it has shown incredible success, shipping nearly 50,000 units worldwide. Furthermore, for Model X, Tesla intends to use 60% of the same parts utilized in the manufacturing of Model S. Kallo adds, "Although we were concerned about the rate of Model X deliveries, recent data points show production is accelerating, which should drive deliveries and margin expansion throughout 2016."

Another promising notion reinforcing Kallo's upgrade is Tesla's expected reduction of battery costs, which could significantly improve gross margins. The "Powerwall," Tesla's current grid battery, is priced at about $250/kWh, however according to CTO JB Strabuel, the price is expected to drop to about $100/kWh by the end of the decade. Kallo elaborates on this, commenting, "We believe TSLA is ahead of expectations on reducing battery costs, and continues to have a significant lead on competing EVs. We would be buyers at current levels."

Out of the 23 analysts polled by TipRanks, 10 rate Tesla Motors stock a Buy, 6 rate the stock a Hold and 7 recommend a Sell. With a return potential of 21%, the stock's consensus target price stands at $259.

Walt Disney Co 

Piper Jaffray analyst Stan Meyers reiterated an Overweight rating on Walt Disney in light of the company'sZootopia movie premiere last week. The Disney film received a whopping 98% score on "Rotten Tomatoes" and an "A" rating on "CinemaScore" from opening day audiences. These high rating expectations did not lead to disappointment.

Zootopia, the new record holder for the highest grossing animated March premier held at $73.7 million, dominated the box office seizing the number one spot. Additionally, the film set an impressive all-time box office record for a Disney animated film, trumping the Big Hero 6 film which previously held the record at $56 million. Zootopia is now the ninth-largest animated opening in history, and the second-best animated IMAX.

Meyers remarks, "Zootopia continues its strong run, outperforming expectations by 50-60% and supporting our thesis that Disney's film slate (combined with consumer products and theme parks) will drive the overall performance at an accelerated pace over the next three years."

Also a contributing factor to Disney's now bullish stance in the market is its boosting merchandise sales. Disney's range of merchandise has recently expanded to target girls, introducing cosmetics, jewelry, and even fashion by Forever 21, which introduced a line of Star Wars attire. Disney's consumer products revenue surged 13% between 2014 and 2015. The analyst gives input on this topic mentioning, "Disney's content machine is driving strong merchandise sales. Based on our channel checks, merchandise (apparel in particular) is selling out quickly with dresses already out of stock, boding well for the Consumer Products segment."

According to TipRanks, based on 21 analysts offering recommendations for Disney in the last three months, 10 have said to buy, and 9 maintained a holding stance. The stock's current price target is at $106.47 with an 8.71% upside.