Is Tesla Worth $350/Share? Jefferies Thinks So

In a report published Tuesday, analysts at Jefferies initiated coverage of Tesla Motors, Inc. TSLA with a Buy rating and price target of $350. The analysts believe that concerns regarding the company' China sales are overdone. Jefferies' proprietary survey of 700 participants revealed that the "[w]orries about China sales are overblown as detailed consumer survey uncovers TSLA could sell at least 500K cars/year by 2020 in NA/WE alone." This, the analysts believe, is still less than 0.5 percent of the global light vehicle sales expected by 2020. Therefore, the company is expected to be able to deliver revenue growth at 35-40 percent 5-year CAGR and EBITDA at 60 percent 5-year CAGR by 2020. According to Jefferies, "It's all about the battery, in which TSLA has a distinct competitive advantage. The company's relentless drive to improve battery energy storage capacity, longevity, power delivery and performance while lowering cost per kilowatt-hour results in a key competitive advantage that helps TSLA evolve into new markets, products and services." Better than anticipated demand and sales performance, underappreciated execution track record and cost improvement opportunities, and lower net spend on R&D/ad spend ratio are all expected to lead to a widening of the gap between company's outperformance and the consensus by 2020.