More and more analysts are beginning to realize that Tesla Motors Inc (NASDAQ:TSLA) is in a good position to beat the sales guidance it provided at the end of the last quarter. Barclays analysts agree, but they still see $141 per share as a fair value for the automaker.

Tesla Motors

A dilemma around Tesla shares

Analysts Brian A. Johnson, Steven Hempel and Dan Levy issued a report this week saying they certainly see positive sales momentum at Tesla Motors Inc (NASDAQ:TSLA), but they still see the automaker’s valuation as being rich. They said the company’s third quarter “highlights the dilemma” they have regarding its stock because they are balancing Tesla’s near-term success with the Model S with the longer-term potential that it will be able to successfully enter the mass market auto industry.

They do believe that the company will have made progress in sales more quickly than it guided to do, and that, along with progress in gross margins, will likely keep pushing Tesla shares further and further above what they see as their fair value.

Tesla’s gross margins probably still growing

The Barclays analysts said they expect to see continued progress in Tesla Motors Inc (NASDAQ:TSLA)’s gross margins, but they trimmed their earnings per share estimates from 27 cents to 17 cents because they’re expecting higher operating expenses. They believe the company will have higher research and development and selling, general and administrative expenses. The analysts also cut Tesla’s average selling price “to better reflect the roll-off of regulatory credits.”

Nonetheless, they still remain ahead of consensus, which is 12 cents per share. They see gross margin, excluding regulatory credit, “is a better lens.” They expect to see the metric rising from 14.8 percent in the second quarter of the year to 19.4 percent in the third quarter. They cite a faster delivery pace and probable improvements in the company’s manufacturing process. The analysts also increased their revenue estimate from $597 million to $598 million.

Making assumptions about Tesla

They said their price target of $141 per share assumes “a high probability” that Tesla Motors Inc (NASDAQ:TSLA) will sell more than 400,000 vehicles by the end of the decade. The analysts believe the automaker’s current share price reflects “almost near certainty” that Tesla will not only succeed in the mass market Generation III vehicle, but also grow into a 1 million unit manufacturer by the end of the decade.

Their value provides a greater than 50 percent probability of breaking into the mass market and also “some ability to become a true mass-market automaker.” They remain Neutral on Tesla Motors Inc (NASDAQ:TSLA).