Tesla Motors Inc (TSLA): What’s Not To Like?

Tesla Motors Inc (TSLA): What’s Not To Like?
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Tesla Motors Inc (NASDAQ:TSLA) has held on above $200 a share in the wake of its earnings report, and as a whole, analysts just don’t know what to think about the automaker. Most appear to be scratching their heads in terms of the valuation. Trefis analysts have a price estimate that’s 45% lower than the current trading price because of concerns about capital expenditures. JPMorgan analysts, however, continue to believe the sky’s the limit. In fact, they’re even more convinced now.

Tesla provides a positive outlook

One of the main reasons Wall Street went even crazier than usual because the outlook provided by Tesla Motors Inc (NASDAQ:TSLA) was better than expected. JPMorgan analyst Adam Jonas and his team report that the company’s projected run rate for this year is 25% higher than even they had expected. The automaker wants to be churning out 1,000 Model S sedans a week by the end of this year, compared to its previous guidance of 800 a week. Jonas said this higher run rate is at least two years ahead of where they thought it would be.

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He also said that Tesla Motors Inc (NASDAQ:TSLA)’s comments about demand outside the U.S. are “farm more bullish” than what they incorporated into their earnings model. The automaker thinks that demand in Europe and Asia can be double that of North America by the end of the year. They weren’t expecting this level of non-North American demand until at least 2025.

They were also encouraged by the comments about the Model X. Management said demand could surpass that of the Model S, and they agree. Tesla Motors Inc (NASDAQ:TSLA) reported a reservation balance of $160 million, which was again higher than they expected, and indicated large preorders for the crossover vehicle.

What’s next for Tesla?

The JPMorgan team asked Tesla Motors Inc (NASDAQ:TSLA) on the conference call if it could be opportunistic in raising capital to help reduce business risk and speed up development of other business opportunities, like the planned gigafactory. Tesla management said it was a “good idea” and a “smart move.” The analysts don’t think there is any other automaker with a “cheaper cost of capital than Tesla.”

They also think that we are currently “witnessing the most disruptive intersection of manufacturing, innovation and capital experienced by the auto industry in more than a century.”

What’s wrong with Tesla?

But of course not all analysts have such a rosy view of Tesla Motors Inc (NASDAQ:TSLA). In their recent report, Trefis analysts mentioned many positives, like the rapidly expanding margins and the extremely positive outlook. However, the one problem area they have with the automaker is increasing administrative and capital expenditures, which are the result of rapid expansion as the automaker builds new showrooms and expands its Supercharger network. They do note that these numbers as a percentage of revenues will probably dramatically decline over time, however.

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