Analysts at Baird Upgrade Tesla
Ben Kallo, analyst at R.W. Baird upgraded shares of Tesla Motors (NASDAQ: TSLA) to Outperform following the company's remarks at the Detroit Auto Show.
Kallo believes that there are several upcoming catalysts that justifies buying shares at the current levels, including the company's “platform design” approach which provides an efficient method of introducing new models in the future.
“Tesla has designed the platform architecture for the Model S to serve as a basis point for future vehicle models, allowing it to leverage existing designs/processes to expand its car line quickly and cost-effectively,” Kallo write in a research report that was published on Tuesday afternoon. “As a result, it estimates the development process for the Model X will require approximately half the time and one-third the CapEx as the Model S.”
Kallo wrote that Tesla's “Gen III” model should outperform competitors such as the BMW 3 Series and Audi A4, especially with an ASP of $35,000 which does not factor in annual gas savings and tax credits.
“We think our current sales estimate for the Gen III (185K in 2018) is achievable,” Kallo wrote.
Tesla's strength and desirability stems partly from its strategic partnerships and investors, according to Kallo, who wrote “we believe investors will view these partnerships and investments as sources of validation for Tesla's technology.”
Among these strategic partners include Daimler who invested $76 million in Tesla via Blackstar. Tesla has an agreement to provide full powertrains for a new Mercedes EV model expected to debut in 2014. Panasonic recently agreed to supply up to 2 billion automotive grade lithium0ion battery cells to Tesla from 2014 through 2017.
Investors and car enthusiasts alike will find the next 18 months interesting as Tesla has “several significant milestones” coming up, according to Kallo.
Tesla is expected to expand its production lines, begin shipping the Model X, build out of store fronts and super charger networks and continue expanding across Europe and Asia. “We believe execution on several of these fronts could drive the stock price higher in the near to intermediate term,” according to Kallo.
Shares are Outperform rated with a $187.00. price target.
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