We’ve been wondering just where the emotional bottom would be on Tesla Motors Inc (NASDAQ:TSLA) shares, and it’s possible we might have found it. Shares rose more than 5% during the regular trading day on Wednesday. Deutsche Bank analyst Dan Galves also issued a positive report on the company’s stock, which might have helped give it a boost.
A “benign outcome” expected for NHTSA probe
The analyst continues to rate shares of Tesla Motors Inc (NASDAQ:TSLA) as a Buy with a price target of $200 per share. He sees the recent significant decline in share price as a buying opportunity for investors, citing several potential positive catalysts he expects over the next few months. He notes that sentiment is a problem right now and suggests that a positive end to the National Highway Traffic Safety Administration’s investigation into the Model S fires could certainly provide a boost.
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He notes that the agency referenced the fact that the Model S protected its occupants very well when it launched its investigation. He agrees with CEO Elon Musk that the NHTSA probably won’t have anything serious to say about the quality of the vehicle and said he thinks the investigation will have “a benign outcome,” particularly after Tesla Motors Inc (NASDAQ:TSLA) sent out a software update which adjusts the height at which the vehicle rides at which speeds. The car now has to hit speeds over 80 miles per hour before it will lower itself for better aerodynamics. That extra space underneath the car could provide enough room to prevent pieces of metal from penetrating it.
Other positives for Tesla
He also notes good news about orders from China, news about accelerating orders and increased protection, rising gross margins, and better leverage in operating expenses. Tesla Motors Inc (NASDAQ:TSLA) continues to emphasize that supply—not demand—is constrained, which is an excellent thing for investors, particularly since this means people still want the Model S in spite of the fiery wrecks. Just this week, Musk said sales are higher than expected.
An opportunity in Tesla
Galves believes that the earnings multiple on Tesla is now more reasonable before the launch of its Generation III vehicle. He says it’s “significant” that the share price is now only accounting for earnings levels from the two vehicles before the Generation III—the current Model S and next year’s Model X.
Tesla Motors Inc (NASDAQ:TSLA) has said it is aiming for 25% gross margins by the end of the year, and Galves thinks the company will not only meet that but exceed it. He says consensus is currently only implying a 25% margin through 2015.