Tesla Motors Inc (NASDAQ:TSLA) surprised everyone when it reported that it had beaten its own guidance for vehicle deliveries in December. In light of that higher delivery number, JPMorgan (NYSE:JPM) analyst Ryan Brinkman has increased his estimates for the automaker, although he kept his Neutral rating and $115 per share price target on Tesla.

Tesla Motors TSLA

Taking a “kinder view” of Tesla

In his recent report, Brinkman said they now have a “kinder view” of demand for Tesla Motors Inc (NASDAQ:TSLA)’s Model S sedan in light of the company’s delivery number. Tesla said it delivered about 6,900 vehicles during the December quarter, compared to its previous guidance of a little under 6,000 vehicles.

Brinkman said he now expects Tesla Motors Inc (NASDAQ:TSLA) to increase its production even further than it already has. Currently the automaker is producing a little over 600 vehicles per week, compared to about 550 vehicles at the end of the third quarter.

JPMorgan increases production estimates for Tesla

Because of higher production rates and higher demand, the analyst increased his estimates for most upcoming periods. He now predicts that Tesla will deliver 34,700 vehicles in all of 2014, compared to his previous estimate of 29,000. By 2020, he predicts that Tesla will be producing 51,600 vehicles a year, compared to his previous estimate of 47,000 vehicles.

For the Model X, the JPMorgan analyst believes Tesla Motors Inc (NASDAQ:TSLA) will deliver 23,000 units in 2020, compared to 19,000 units previously. They are projecting volumes of 125,000 Generation III vehicles in 2020, compared to their previous estimate of 120,000 vehicles.

Why a Neutral rating on Tesla?

In order to come up with his Neutral rating for Tesla Motors Inc (NASDAQ:TSLA), Brinkman said he balanced “notable investment positives, including a highly differentiated business model, appealing product portfolio, and leading-edge technology, with above-average execution risk and valuation that seems to be pricing in a lot.” He notes that the automaker doesn’t have any of the pension, OPEB or other legacy costs which burden most automakers.

Also he calls Tesla Motors Inc (NASDAQ:TSLA)’s cars “bold, distinctive, elegant, and highly entertaining to drive.” In addition, he sees the automaker’s management as “visionary” and “solid.” He believes that the risk of Tesla’s technology seems far less than previously thought, although execution risk remains high because the automaker hasn’t yet shown that it can produce Model S sedans with the combination of volume and margins assumed in its business plan.

Tags: