Bernstein Starts Tesla Motors (TSLA) at Market Perform, Is Bullish On Adoption Of EVs

March 8, 2017 4:35 PM EST
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(Updated - March 9, 2017 3:51 AM EST) (updated to include analyst comment)

Bernstein initiates coverage on Tesla Motors (NASDAQ: TSLA) with a Market Perform rating and a price target of $250.00.

In a note titled "Burning Rubber and Burning Cash: The Future Can't Come Soon Enough" Bernstein's analyst comments (emphasis ours) "The traditional automotive market is being disrupted, and the source of it is one upstart player - Tesla. We have seen this pattern play out before (with AAPL, NFLX, AMZN), where a single company triggers a sea-change in outlook among consumers and, eventually, among traditional incumbents, who further validate the shift. In part due to Tesla's catalyzing role, we are bullish on adoption of EVs. Our experience is that consumer technology disruptions occur much more quickly than is typically expected. We believe that EVs could be 40% of the auto market in 20 years and over 50% by 2050."

Bernstein is bullish on three points that offer advantages to Tesla:

"We believe that Tesla has three key advantages: (1) a lead in battery technology cost; (2) unparalleled consumer awareness and brand; & (3) vertical integration that is not only brandreinforcing, but creates material cost savings in distribution - collectively these advantages could translate into an 800 bps+ profitability advantage long term vs. traditional OEMs."

However, the near-term concerns are real and Bernstein has several concerns:

"While we are bullish about Tesla's long-term potential, we have several near term concerns, most notably (1) gross margins, as Model 3 and its associated capex ramps up, and (2) Tesla's overall customer experience – which we believe is not strong today – and could be further pressured as the company migrates to selling to a more mass-market consumer. A poor ramp and customer experience on Model 3 could not only impact Tesla's near-term financials, but undermine the franchise longer-term."

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 $248.59 yesterday.

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