Tesla Motors (TSLA) Q4 Volume Guidance 'Achievable' and Higher Earnings in Focus - Credit Suisse

Credit Suisse analyst Dan Galves reiterated an Outperform rating and $325 price target on Tesla Motors (NASDAQ: TSLA), saying fourth quarter guidance looks achievable and they still see a reasonable path to $4 EPS in 2016.

Galves said the debate on the stock centers around short term issues, namely Model X production ramp and Q4 volume. They expect both of theses issues to be addressed in a positive way by early January when the company discloses Q4 volumes, which will allowing the Street to re-focus on the long-term story.

Galves sees 17k units in Q4 as achievable. "Our estimates are based on 15k orders in Q3, 1k incremental sales in Denmark (due to year-end tax changes), and 1k incremental sales in UK," Galves said.

The analyst also said an Model X ramp is imminent. ": Early X consumers (in the VIN 400-800 range) are beginning to be contacted about December delivery and Monday's release of full Model X specs / pricing indicates that production ramp is in sight," he said.

Overall, Galves sees 2016 as a much cleaner year, which enables operating leverage. "The biggest future catalyst we see is Tesla generating significantly higher earnings and reducing the cash burn," he said. "From $2.30 annualized loss in 3Q15, we estimate 36k incremental Model X units will drive $7 of incremental EPS. This, plus better Model S margin, offset by lower-than-consensus SG&A / R&D growth means that $4 EPS (vs consensus $1.86) and a reduction in fullyear FCF burn to ~$500MM is achievable…although we think even hitting consensus numbers in 2016 would be a substantial catalyst."

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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 $218.25 yesterday.

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