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Battery Electric Vehicles Are the Way Forward; ISI Group Starts Tesla Motors (TSLA) at Buy

September 15, 2014 5:39 PM EDT
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Price: $173.80 +6.25%

Rating Summary:
    24 Buy, 26 Hold, 13 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 20 | Down: 14 | New: 22
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ISI Group initiated coverage on Tesla Motors (NASDAQ: TSLA) with a Buy rating and a price target of $320. Analysts George Galliers and Arndt Ellinghorst think battery electric vehicles are the way forward, not hydrogen fuel cell electric vehicles. Given its global opportunity, including in China, they think Tesla can sell 500 thousand units by 2020.

"We believe too much focus is placed on Tesla as a US electric car maker. In this report, we analyse Tesla in the context of the global industry and prevailing trends. Tesla is not exposed to the single largest threat to automotive returns, namely global emissions standards. As we show, conventional OEMs face headwinds of c$1,350 per unit. Yet, for Tesla costs will come down, (ISIe c17.3%), with technology advances and scale. Similarly, Tesla’s volumes are frequently compared to other electric vehicle sales. However, the global market opportunity for Tesla is far greater, and our analysis of segments and regions suggests 500k units by 2020 is achievable (ISIe 503k)," said the analysts.

"Tesla has reached several milestones and investors will be rewarded in the future. However, few are as important as the company’s progress in China. Examining China’s electric vehicle policy, it is difficult to foresee an OEM better placed than Tesla to assist the government in meeting its goals. Meanwhile, Chinese annual premium car sales are expected to increase by 1.2mn units by 2020. The opportunity for Tesla is substantial. Of course, to leverage opportunities Tesla needs to invest. Reassuringly, our deep-dive into store, service centre, supercharger and product investments suggests Tesla’s funding is self-sufficient going forward," they continued.

"The Model S demonstrates Tesla’s technology advantage with respect to Battery Electric Vehicles (BEVs/EVs). We believe BEVs and not Hydrogen Fuel Cell Electric Vehicles (FCEVs) present the optimum solution as OEMs pursue tailpipe emission free cars. Examining well-to-wheel efficiency, total cost of ownership and absolute powertrain costs, we believe the long-term case for BEVs outweighs that for FCEVs," added the analysts.

For an analyst ratings summary and ratings history on Tesla Motors click here. For more ratings news on Tesla Motors click here.

Shares of Tesla Motors closed at $279.20 yesterday.



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