Tesla Motors Inc (NASDAQ:TSLA) stock had been trading sideways for close to a month as the market seemed to find something like a fair price for the stock. That all changed today, however, as Deutsche Bank shook the market up and brought new high prices to shares in the electric car maker.
A new report from Deutsche Bank puts a price target of $200 on Telsa Motors Inc (NASDAQ:TSLA). The bank’s last price target on the company was just $160. The report wasn’t just a new number, however, it contained research that pointed to a great year ahead for Tesla.
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Tesla Motors to $200
The report cites research and information with management in order to back up an assertion that Tesla Motors Inc (NASDAQ:TSLA) will beat on gross margins in its next earnings report. Tesla is expected to release its earnings report for the current quarter in the next couple of months.
The basis of the $200 price target is the positive risk reward ratio that DB sees for investors. Tesla Motors Inc (NASDAQ:TSLA) is in a risky business and buying shares of a $21 billion unprofitable company for $176 is just about the definition of risky investing. the possible reward in the electric car business is worth it, however, according to the analysts.
There is “low potential for negative catalysts in the near term,” according to the analysts. Tesla Motors Inc (NASDAQ:TSLA) investors are weighting the potential value of the company at the end of the decade against the risks in the short term. If their model is anything like the DB analysis, they’re coming up with the same answer: Buy.
Tesla’s gross margin
One of the most continually amazing parts of Tesla Motors Inc (NASDAQ:TSLA) business is the margins the company seems confident it will be able to command. It is a market mover, but it is operating in a traditionally lower margin business. The Deutsche Bank analysis suggest that the margin will move even higher in the next earnings report.
Tesla Motors Inc (NASDAQ:TSLA) had a gross margin of 14% in the last quarter, and the DB analysts were previously expecting 19% from Q3. The new report bumps that figure up to 20%, however, and continues to anticipate a gross margin of 25% in the fourth quarter of the year.
Tesla Motors Inc (NASDAQ:TSLA) is an amazing company and its ability to control costs while scaling is one of its most amazing features. The company may well hit $200 in the next twelve months. If today’s market moves are anything to go by, it could get there sooner rather than later.