Tesla Motors Inc: Catalysts Could Push Stock Higher

Tesla stockBlomst / Pixabay

Last week Tesla Motors Inc (NASDAQ:TSLA) announced that it is making all of its patents open source in an effort to speed up adoption of electric vehicles. Analysts are starting to weigh in on the news, with those at Baird and Morgan Stanley saying it’s an incremental positive.

Tesla aims to create the go-to EV platform

In a report dated June 13, 2014, Morgan Stanley analysts Adam Jonas, Ravi Shanker and Paresh Jain say in addition to trying to speed up EV adoption, they believe the opening of Tesla Motors Inc (NASDAQ:TSLA)’s patents is part of the automaker’s marketing and PR strategy. They believe Tesla would benefit greatly if the auto industry adopted its battery format and EV charging infrastructure. They say the value of Tesla’s cars will increase if the “number of charging stations multiplied.”

However, the Morgan Stanley team doesn’t think any of Tesla Motors Inc (NASDAQ:TSLA)’s competitors will take advantage of the company’s open patents. They say traditional automakers seem to be de-emphasizing electric car development and targeting other technology instead. They think established automakers have too much to lose if there is a fatal battery fire.

PR, political impacts on Tesla

The Morgan Stanley analysts say the real value in Tesla Motors Inc (NASDAQ:TSLA)’s open source decision is the PR impact and “political clout.” They expect traditional automakers to keep trying to impede regulatory requirements for electric car penetration. Specifically, they think the companies will attempt to change the rules set forth by the California Air Resources Board, which many other states are adopting.

They think that by sharing its patents with competitors, Tesla Motors Inc (NASDAQ:TSLA) defends itself as a proponent for EV technology and attacks its competitors’ excuses. They also believe that the automaker is “finding new ways to assert itself at the state and Federal level as America’s most important car company.” The Morgan Stanley team has an Overweight rating on Tesla.

Tesla targets faster electric car adoption

In a separate report dated June 13, 2014, Baird analysts Ben Kallo and Tyler Frank said they see the open source decision as having a very minimal impact on Tesla Motors Inc (NASDAQ:TSLA) in the near term. They think this will foster growth and adoption of electric cars in the long term. Tesla also said it will collaborate with other companies in developing its Supercharger network, which will increase the number of charging stations that are available as the number of electric cars increases.

Tesla Motors Inc (NASDAQ:TSLA) said that it opened its patents because demand for its cars continues to outstrip their ability to produce them fast enough. Baird analysts agree, and they say that incremental electric car adoptions should help the overall demand for the automaker’s vehicles.

Tesla to see upcoming catalysts

Baird analysts Kallo and Frank added that Tesla Motors Inc (NASDAQ:TSLA) continues to be their top pick for the second half of this year, as they expect the stock to go higher on several catalysts. They maintained their Outperform rating and $275 per share price target.

They note that Tesla is ramping up production to be able to handle a thousand vehicles a week. In addition, Tesla is expected to meet or possibly exceed its 2014 gross margin target of 28%. The automaker will also be introducing the Model X and be revealing more news about the gigafactory. Potential news about the facility include a site location, announcements about partners, and groundbreaking on the facility.

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About the Author

Michelle Jones
Michelle Jones was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Michelle has been with ValueWalk since 2012 and is now our editor-in-chief. Email her at Mjones@valuewalk.com.

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