Tesla Motors Inc (NASDAQ:TSLA) shares have been slumping for much of the week, but that started to change on Friday after a big upgrade from analysts at Deutsche Bank. Shares rose as much as 4 percent in the wake of the report, which was written by Dan Galves. He upgraded the stock from Hold to Buy and raised his price target from $50 per share to $160 per share.
Concerns about Tesla lessened
The analyst went on to say that some big concerns they had about Tesla Motors Inc (NASDAQ:TSLA) have been answered. He said that the company has made big progress in terms of improving the range of electric vehicles and lowering the cost of batteries. In his estimation, Tesla Motors Inc (NASDAQ:TSLA)’s battery pack costs around $350 per kilowatt hour, although the battery packs made by company’s competitors cost closer to $500 or $600 per kilowatt hour. He also notes that the battery packs do weigh about 40 percent more than similar packs for other vehicles like the Nissan Leaf, but they get 3.5 miles per kilowatt hour, compared to 3.1 miles for the Nissan Leaf
Also the quality of the vehicles was less of a worry after Consumer Reports issued the rave review about the Tesla Model S earlier this year.
Sustainability seems more likely for Tesla
One of the issues bears have brought up in connection with Tesla Motors Inc (NASDAQ:TSLA) is sustainability. They note that orders in the U.S. went up to 20,000 annualized, compared to 12,000 to 13,000 in the first quarter. As a result, they are less worried about whether demand for the automaker’s electric vehicles can be sustained.
The other area of sustainability was in connection with the company’s competitive advantage, but Galves said the company’s plans to expand its Supercharger network have alleviated that worry. In fact, they could extend Tesla Motors Inc (NASDAQ:TSLA)’s advantage even more.
Tesla Motors’ gross margins are looking good
Earlier this year, Tesla Motors Inc (NASDAQ:TSLA) said they expect to hit a 25 percent gross margin by the end of this year without the use of Zero Emission Vehicle credits. Deutsche Bank analysts said they are more comfortable with the company’s push toward a 25 percent gross margin. In fact, they even said they’re expecting an upside surprise when the automaker releases its second quarter results in a couple of weeks. They even see a potential 35 percent gross margin as being possible for volumes greater than 50,000.
The analysts also did some work on gross margins for the planned Generation III mass market vehicle. They believe Tesla Motors Inc (NASDAQ:TSLA) will be able to “fully close the cost gap” to competing vehicles that are not electric while still keeping margins in the 25 percent range.