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Tesla Stock Undervalued, Could Reach $160 (Deutsche Bank Report)

Tesla Motors’ stock is greatly undervalued, according to a new report from Deutsche Bank. Analysts there think that Tesla’s stock may climb to as high as $160 a share within only the next few years — a climb of about 24% from its value at the time of the report.

The Deutsche Bank analysts who wrote the report — Dan Galves, Rod Lache, Mike Levin, and Patrick Nolan — state that they think the stock may even double in value within only the next three to four years, and they have upgraded their rating for the stock from Hold to Buy.

Tesla Motors (TSLA) shares are currently valued at $134.62 — as of 7:51pm ET July 29, 2013.

Tesla Motors announces upgraded Supercharger network

Image Credit: Tesla Model S (cropped) by tjdt.

Here’s an excerpt from the report, via Barron’s:

“We have been late in recognizing that the Street would value Tesla on out-year potential and have been overly focused on the risks. Over the last few months, 5 things have changed our mind: 1) The stellar Consumer Reports review lessened our concern on quality issues that were experienced by early customers; 2) U.S. orders have risen to 20k annualized (vs 12k-13k in Q1), reducing concerns on sustainability of demand; 3) Supercharger network buildout has potential to extend and sustain TSLA’s competitive advantage; 4) We’ve become more comfortable with the walk to 25% gross margins in Q4 (in fact, we expect an upside surprise in Q2). And now see potential for 35%+ on vol’s >50k; and, 5) Based on proprietary work, we now expect the Gen3 vehicle to fully close the cost gap to non-EV competition with margins in the 25% range.

“On 200k units (5% of TAM, potentially conservative), we believe TSLA can generate $13bn revenue, 20% EBIT margins, and $14 of EPS. Given TSLA’s head-start in a technology that we believe will enjoy a long-period of outsized growth, we believe investors would pay 20x EPS (double normal auto multiples) in the ‘16 / ‘17 period. We discount back 4 yrs to arrive at our target price of $160. Key risks are demand and quality.”

 
Written By

James Ayre's background is predominantly in geopolitics and history, but he has an obsessive interest in pretty much everything. After an early life spent in the Imperial Free City of Dortmund, James followed the river Ruhr to Cofbuokheim, where he attended the University of Astnide. And where he also briefly considered entering the coal mining business. He currently writes for a living, on a broad variety of subjects, ranging from science, to politics, to military history, to renewable energy. You can follow his work on Google+.

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