Join        Login             Stock Quote

Tesla (TSLA) Is Still A Sweet Ride

 December 21, 2012 12:49 PM

(By Kevin Donovan) Like the Mayan calendar and Skeeter Davis (see here), it seems the Tesla (TSLA) bears have been moaning to investors "Don't they-ey know, it's the end of the world …" C'mon, fellas, cover those short positions and be done with it.  For our part, we're reiterating our purchase advice for those comfortable with above average risk.

Tesla shares have appreciated almost 20% since we recommended purchase on Sept. 28.  Our discounted cash flow assumptions point to a $48 price target.  (Our valuation argument can be found here).  While not overlooking the legitimate arguments of the doubters, we can't help but be persuaded that Motor Trend's Car of the Year, the Tesla Model S, is on track to begin generating sustainable positive cash flow and rewards for shareholders.

[Related -Tesla Motors Inc. (TSLA) – 3T Analysis: Driving Towards the 52-Week High]

Indeed, the company's billionaire CEO Elon Musk tweeted earlier this month that the company turned cash flow positive the last week in November. Given that the production ramp veers sharply higher in 2013, we're encouraged.  A 20,000-unit target and a $59,000 base price per car yields $1.18 billion in revenue. Analysts' average estimate for 2013 is $1.63 billion, quadruple the estimate for 2012.

[Related -Tesla (TSLA): Should You Buy Tesla at This Level?]

To be sure, Tesla has yet to post a profit and has drawn down all of its Department of Energy loan facility.  It also had to dip into the capital markets in the third quarter with a secondary offering of common shares that yielded $222.1 million of cash.  Notably, CEO Musk bought 35,398 shares at the offering price of $28.25 per share.  So, clearly, Tesla's need for cash is grist for the mills of the bear camp.  And then there's the hurdle of charging up the all-electric cars.  The car can be charged at home and Tesla has installed "supercharger" facilities in California that enable a range of 300 miles, but the hassle of it all could limit sales.

But the Tesla is no DeLorean in our view.  Though far from widespread now, electric cars are destined to command a significant share of the automobile market, we believe.  By all accounts, Tesla's Model S is a superior vehicle that should claim a leading spot in that growing market.  There is also the possibility a bigger manufacturer might consider buying the company to snag a top-of-the-line model in the electric car market.     

In short, apocalyptic pronouncements are exaggerated.  We would take advantage of weakness caused by "fiscal cliff" fears depressing the entire market to buy Tesla today.
iOnTheMarket Premium


Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageBaseball, Hot-dogs and Apple Pie Stocks for the July 4th Holiday

Three stocks to own for a piece of Americana – baseball, hot-dogs and apple read on...

article imageTenaris SA (TS): Neutral on Sales, Buy on Earnings

Tenaris SA (TS) shares are outperforming the market today. The extra oomph comes via an upgrade from read on...

article imageContainer Store Group Inc. (TCS) Q1 Earnings Preview: Third Time the Charm?

Container Store Group Inc. (NYSE:TCS) will release its financial results for the first quarter of fiscal read on...

article imageUrban Outfitters, Inc. (URBN): Bottom Fishing or Fishing For a New Bottom

It is time to do some bottom fishing with Urban Outfitters, Inc. (NASDAQ:URBN). Well, it is at least what read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.