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Tesla Motors Inc (TSLA): The Bulls Take On Goldman

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With Tesla Motors Inc (NASDAQ:TSLA)’s status as a cult stock, it was only a matter of time before the bulls got onto the report earlier this week from Goldman Sachs, which sent the automaker’s stock into a nosedive. The day has finally arrived as analysts from at least two firms take direct aim at the report.

Tesla Motors Inc (TSLA): The Bulls Take On Goldman

Forbes contributor Mark Rogowsky notes that the report which sent Tesla shares down was 53 pages long, but the part about Tesla Motors Inc (NASDAQ:TSLA) was only “about one paragraph.” He believes that the report “very likely fails to reflect the range of possibilities.”

Breaking down Tesla’s Model S, Gen III Ratios

He took a closer look at the ratios and potential shipments for Tesla Motors Inc (NASDAQ:TSLA) over the next couple of years. He said when comparing Tesla to BMW’s sales in the U.S., it would indicate that the third generation Tesla will outsell the Model S by at least three to two because the 3-series BMW outsells the combined 5 and 7 series. However, he believes “the numbers should skew much higher.”

He notes that the physical size of the Model S is similar to that of the 7 series. The 3 series outsells the 7 series nine to one, according to Rogowsky. He says that’s important in the U.S. but especially in Europe where larger cars “are comparatively rare.”

Tesla’s sales potential is great

Another area where he takes issue with the report from Goldman Sachs Group, Inc. (NYSE:GS) is the assumption that the best case scenario for Tesla Motors Inc (NASDAQ:TSLA)’s Generation III line (including both the car and the crossover) is that it will outsell the luxury models three to one. He brings gas savings into the picture and notes that not only will Tesla’s Generation III vehicles compete with the BMW 3 series but also part of the high-end Honda Accord and Toyota Camry markets.

He admits that this doesn’t mean Tesla will dominate any of these parts of the automotive market. However, he says it does mean that it won’t be difficult for the EV automaker to sell 100,000 of its less expensive vehicles in the U.S. alone, which would mean a five to one ratio verses the company’s luxury models.

What is Tesla really worth per share?

Rogowsky estimates that worldwide demand for the Generation III vehicles would be around 250,000 vehicles, and he says that could be somewhat conservative. However, he said that his middle case estimate for Tesla Motors Inc (NASDAQ:TSLA) is 350,000 vehicles, and when using Goldman’s multiple for determining the price, he ends up with a $200 per share price target—much higher than the target prices in Goldman’s report.

Dougherty & Co. analyst Andrea James, who has come to Tesla’s defense before, also sees a $200 per share price target for the company based on execution risk. Ultimately though, she believes the stock is worth $300 per share, reports Bloomberg Businessweek’s Roben Farzad.

James said Tesla Motors Inc (NASDAQ:TSLA) “makes the best product in an industry that does $1.5 trillion in sales.” She said if the automaker grabs only 2 percent of the market share, the result is a $200 per share price target.

Tesla’s margins will hit 25 percent

Tesla Motors Inc (NASDAQ:TSLA) Chief Executive Officer Elon Musk said earlier this year that they’re aiming for a 25 percent gross margin by the end of the year without sales from regulatory credits. James believes that the company will hit that target but goes a step further. By 2017, she predicts that Tesla will have learned enough about producing electric vehicles with the Model S that its Generation III vehicle will also have a 25 percent margin. She also believes the less expensive vehicle will catch on more quickly than the Model S.

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