Tesla Motors Inc (TSLA): Wedbush Increases Price Target From $150 To $180

Posted Sep 25, 2013

Wedbush Securities Inc., a private financial services and investment bank, hosted an investment tour at the Tesla Motors Inc (NASDAQ:TSLA) manufacturing facility last week.  After the Tesla Motors Inc (NASDAQ:TSLA) tour, Wedbush analysts Craig Irwin and Min Xu issued a report based on their findings.  Irwin maintained his Neutral rating on Tesla Motors Inc (NASDAQ:TSLA), but raised their price target from $150 per share to $180 per share.

“We hosted an investor tour of Tesla?s manufacturing facility in Fremont, CA and came away impressed with the company?s focused execution. We are increasingly convinced that the company is likely to meet or exceed expectations in both the near and intermediate future?,” stated Wedbush in the PT note.  “We believe all aspects of Model S production are meticulously planned, including the cost out roadmap for 25% vehicle gross margins targeted by the end of 2013. One example is the vehicle gross margins increasing from 5% in 1Q13 to 13% in 2Q13 benefitted from the release of around 500 temporary employees that were initially budgeted for the Model S ramp. We believe Tesla?s suppliers are giving the company price concessions which will contribute in the range of 200 bps to 300 bps to gross margins by the end of the year, equally because of their own cost-out execution and rising expectations for Tesla?s future.”

The reason why they did not report a Buy is because they want to have higher confidence n the market penetration rate beyond Tesla’s identified early adopters before giving a more constructive view on the stock.

Wedbush said that their target is based on the Tesla Motors Inc (NASDAQ:TSLA) estimated 2017 EPS of $7.55.  The multiple that they used before was 25.  Wedbush also discounted back 4 years using a 6% discount rate, according to ValueWalk.  Wedbush valued Tesla Motors Inc (NASDAQ:TSLA) on 2017 estimates because that is the first year that the Generation III mass market vehicle will start to scale.  Wedbush used a multiple 30 because the company is still in growth mode, which allows the company to keep penetrating markets and diversify their vehicle line.

[Source: Barrons]