Bloomberg News

Tesla Tops $30 Billion as Morgan Stanley Boosts Outlook

February 25, 2014

Tesla Model S

Tesla Motors Inc., which last week forecast a more than 55 percent increase in deliveries of its Model S sedans this year, is up more than sevenfold in the past 12 months. Photographer: Patrick T. Fallon/Bloomberg

Tesla Motors Inc. (TSLA:US), the electric-car maker, exceeded $30 billion in market valuation after Morgan Stanley more than doubled its projected price for the stock, saying the company may disrupt the auto and energy industries.

The shares advanced 14 percent to $248 at the close in New York, following the analyst note that projected a 12-month price target of $320 and after Tesla’s Model S sedan became the first U.S. car to receive Consumer Reports’ “best overall pick” in the magazine’s annual ranking. While the stock gave back some earlier gains it’s up sevenfold in the past year and the company’s market cap is now $30.4 billion, more than half that of General Motors Co.’s.

Related:

  • Tesla Sedan Is Ranked ‘Best Overall’ by Consumer Reports
  • Tesla’s Musk Accelerating Vehicle Output Through 2014
  • Video: Elon Musk’s Big Plans to Boost Tesla Production

Chief Executive Officer Elon Musk plans to provide details on a proposed “gigafactory” to produce lithium-ion batteries needed to make more affordable vehicles, he told Bloomberg TV last week. Lower battery costs could help the Palo Alto, California-based company almost double its share of the global car market to about 1 percent and also affect the power industry, Adam Jonas, a Morgan Stanley analyst, wrote in a note.

“If it can be a leader in commercializing battery packs, investors may never look at Tesla the same way again, said Jonas, who rates (TSLA:US) the shares overweight. ‘‘If Tesla can become the world’s low-cost producer in energy storage, we see significant optionality for Tesla to disrupt adjacent industries.’’

Jonas raised his projection for Tesla’s share price in 12 months to $320 from $153. The new estimation uses a 15-year outlook to allow time for the company to expand its lineup and capabilities. In a bull-case scenario, he said the company may be worth as much as $500 a share.

Energy Storage

With each Model S capable of storing enough energy to power the average house for 3.5 days, a growing population of Tesla cars represents a significant increase in how much electricity can be held in a country’s infrastructure.

‘‘The scale of Tesla’s battery production, even for its own use as an auto manufacturer, thrusts the company into ‘key player’ status for grid storage,” Jonas said in the note.

The battery plant would be built with partners, and “there’s a likelihood Panasonic would be part of it,” Musk told Bloomberg last week. Panasonic Corp. (6752) is both a Tesla investor and its main supplier of lithium-ion cells. Panasonic’s participation is “not 100 percent confirmed,” he said.

Tesla is worth more than half of the biggest U.S. automakers. GM’s market valuation is $57.4 billion, and Ford Motor Co.’s is $59.8 billion. Fiat SpA, which owns Chrysler Group LLC, is valued at $13 billion, and Toyota Motor Corp., a Tesla shareholder, is more than $200 billion.

SEC Review

Separately, Tesla today posted a Dec. 30 filing answering questions from the U.S. Securities and Exchange Commission about the company’s method of accounting for residual values of its Model S cars, which had triggered a review.

Tesla in early 2013 announced a financing plan for the Model S backed by Wells Fargo & Co. and U.S. Bancorp, that guarantees a resale value “equal to 50 percent of the base purchase price” of the entry-level car, of about $70,000, and “43 percent of the original purchase price for all options” after 36 months, according to a Tesla agreement obtained by Bloomberg Industries at the time.

The SEC had asked Tesla to ensure that financial releases include results calculated using Generally Accepted Accounting Principles “with equal or greater prominence” to adjusted earnings figures.

“We will revise the formatting of our reconciliation of GAAP to non-GAAP financial information to avoid potential future confusion,” the company said in response. “We plan to reconcile net income (loss) and earnings (loss) per share first, and then, on a separate page, we will reconcile revenues, gross profit (loss), research and development expenses, and selling, general and administrative expenses.”

Calls to Jeff Evanson, Tesla’s head of investor relations, weren’t immediately returned.

To contact the reporter on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net


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Companies Mentioned

  • TSLA
    (Tesla Motors Inc)
    • $260.74 USD
    • 6.88
    • 2.64%
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