Tesla Motors Inc got a Sector Perform rating from RBC Capital on Wednesday. The research firm cited execution risk, dependency on long-term, and ambitious growth targets for not having a more upbeat outlook on Elon Musk’s concern. Analyst Joseph Spark has a price target of $280 on the stock.
Many positives for the stock
In a note to clients, Spark said, “Tesla is a transformative company, leading the charge on the electrification of the vehicle power train and using their battery cost position to potentially disrupt other end-markets.” The analyst said that from opportunity the story is now shifting to execution that has a lot of risks involved.
Spark believes the Tesla Motors story has a lot of positives such in the EV world. The space is seen as a long-term catalyst, and the stock also offers an early opportunity to invest in an energy storage play. The firm leads the Li-ion battery business in terms of cost, and the so-called Gigafactory will help in lowering the costs further.
Spark does not see any “meaningful reason” for Tesla Motors Inc not being able to hit its ambitious targets, but believes that achieving it in a timely fashion would be hard. Spark noted in its report that if the firm fails to hit near-term goals, then it might not have an impact on the long-term view, but could back the stock or provide a more “favorable risk/reward entry point.”
Will Tesla hit delivery target?
Last week, Tesla revealed that in the September quarter it delivered 11,580 cars. This number is in-line with the firms guidance of selling around the same number of units it did in the Q2, but Forbes Chuck Jones believe it could be a bit short of analysts’ estimates.
Tesla is expected to sell 50,000 to 55,000 cars this year. It will be difficult for the firm to hit this target as in the first three quarters it delivered 33,157 cars. This means that for Q4, it will have to deliver 17,000 units to meet the low-end of its guidance.
Over the past 3 months, Tesla Motors Inc lost 9.9% while the S&P 500 had declined just 4.9% for the same period. On Wednesday, Tesla shares closed down 3.93% at $231.96. Year to date, the stock is up over 4% while in the last one-year, they are down over 9%.
Mr. Sparks reckons that Tesla Motors has a good chance at getting to where it’s planning, but the timing is very likely to be of. Given the current state of Model X production, that seems likely. Hitting its 50,000 sales goal for 2015 seems like a reach at this point.