Friday, August 9, 2013

Tesla Motors stock prices outlook 2013-2014

stock market today - Tesla Motors stock prices outlook 2013-2014 :  Tesla Motors Inc. Chief Executive Elon Musk doesn't run his Silicon Valley electric car maker by traditional auto industry rules, and investors are so far rewarding him by putting a value on the company that defies easy comparisons.

Tesla is scheduled to report second quarter results on Wednesday, and most analysts are forecasting a 17-cent-a-share loss. In an industry where strategy is driven by the quest for economies of scale, Tesla is tiny. It delivered just 1,400 Model S electric sedans in July, according to researcher Autodata Corp., or about 1% of Ford Motor Co.'s U.S. sales for the month.

Yet Tesla's share price has more than quadrupled in the past year, to $142.15 on Tuesday and giving it a market value of about $17.15 billion, a quarter of Ford's, and about 70% more than Fiat SpA—majority owner of Chrysler Group LLC.

Despite its small size, the Palo Alto, Calif., company has become among the auto industry's most closely followed. General Motors Co. GM -0.67% CEO Dan Akerson recently ordered a team of GM employees to study Tesla and the ways that it could challenge the established auto industry business model.

Even Wall Street analysts who are enthusiastic about Tesla's prospects have put target prices on the company's shares that are much lower than their current market price.

A Tesla spokesman wouldn't comment on the stock price on Tuesday ahead of disclosing June quarter results on Wednesday. But Mr. Musk and other company officials have said in the past that they foresee a Tesla that is building 400,000 or 500,000 cars a year, and can achieve a market capitalization of as much as $43 billion by 2022. That is the level at which Mr. Musk can collect a chunk of stock under a multi-step compensation plan adopted by Tesla's board last year.

Most car companies are judged on the results they can deliver in the near term. Tesla investors are buying on results that probably won't exist until sometime in the next decade. And even that is only if it can deliver flawless manufacturing execution, continued annual growth and crack through the consumer concerns about driving range and upfront costs that have restrained demand for all-electric vehicles so far.

Analysts are expecting the company to lose 68 cents a share this year and earn 50 cents a stock 2014, according to Zacks Investment Research. By that 2014 projection, its forward price/earnings ratio is 289, compared with Ford's PE of just under 10 and Toyota Motor Corp.'s 7203.TO +0.16% P/E of less than 1, both based on 2014 earnings projections, according to Zacks.

Tesla's P/E ratio is more akin to Internet stocks than car makers. Supporters say that is because the company's electric vehicle sales strategy is disruptive and the auto maker possesses groundbreaking technologies.

Deutsche Bank recently raised its target price for the company's shares to $160. The bank estimates that Tesla will be able to achieve operating profit margins of 20%—or about twice that of BMW AG BMW.XE +1.53% in its most recent quarter—as it ramps up sales and spreads costs over a larger number of vehicles.

"We expect [Tesla] to reach at least 200,000 units by near the end of the decade, which implies about 5% of what we calculate as the addressable market of comparable vehicles in terms of capability and price," the bank said in a note to investors last month.

Tesla sold 8,931 vehicles this year through June, according to Autodata. In contrast, Porsche delivered 81,565 of its big ticket and high margin vehicles globally during the same period.

Mr. Musk has said he believes Tesla can achieve 25% gross margins by the end of this year, meaning that Tesla's direct costs of building cars will be just three-quarters of the revenue it collects from sales. In the first quarter, Tesla's gross margin was 17% of sales.

Wall Street analysts assume that Tesla will sell around 100,000 of the company's "Gen 3" models—electric sedans that are expected to start at about $35,000 when available in late 2016. Investors are counting on Tesla being able to deliver a car that competes against luxury sports cars such as the BMW 3 Series and Audi A4—and not similarly-priced electric cars.

The hurdles are many. Other manufacturers now offering electric cars for under $40,000 have so far failed to generate much volume. The Nissan Leaf, which starts at about $28,800, is on a pace to sell fewer than 50,000 cars this year on a global basis.

Established luxury brands also are planning to challenge Tesla with plug-in models of their own, such as the BMW i3 and a Cadillac ELR plug-in hybrid coming from GM.

Many analysts say the shares currently are overpriced based on their sales and profit projections. Adam Jonas, a Morgan Stanley analyst, says Tesla's shares should be trading at about $109. His estimate assumes Tesla continues to expand its business 15 years into the future to get to his stock value—which is about 23% less than its current price.

Mr. Jonas assumes Tesla eventually can sell more than 200,000 vehicles a year at an average price of $50,000, with the majority of the sales coming from the company's Gen 3 models. This year, Tesla is expected to deliver about 20,000 Model S vehicles.

"We argue that Tesla cannot be valued on traditional near-term multiple metrics like traditional auto companies," Mr. Jonas said.

Goldman Sachs analyst Patrick Archambault has one of the lower stock price estimates at $84 a share. He estimated Tesla will be making about 150,000 vehicles a year and earning about $1.1 billion, or $8.59 a share, in 2018.

Barclays senior analyst Brian Johnson is pegging Tesla at $90 a share. He thinks that Tesla, at a minimum, can sell about 50,000 Model S and Model X vehicles a year around the globe, making it is successful "niche luxury car maker." But that should only get Tesla to about $60 a share in value.

To be worth $90 a share, Tesla has to make a credible entry-level luxury car that he thinks will be priced at between $42,000 and $45,000. "They are going to have to do in five years what it took Audi decades to do—break into the volume entry-level luxury market."

Today's stock price, he said, reflects investors who believe Mr. Musk "is the next Henry Ford."
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