Tesla (TSLA) PT Raised to $245 at Goldman Sachs on Model 3 Order Strength

April 25, 2016 8:38 AM EDT
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Price: $220.39 +1.28%

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Goldman Sachs analyst Patrick Archambault raised his price target on Tesla Motors (NASDAQ: TSLA) to $245.00 (from $202.00) amid Model 3 order strength. However, the analyst stopped short of upgrading the stock and maintained a Neutral rating.

Archambault said as they digest the much larger that expected 400K Model S reservation number they look at three things:

(1) Assess the competitive positioning of Tesla’s product portfolio. While some have argued that the Model 3 demand is more about the cachet of a new Silicon Valley brand than electrification, it’s somewhat helpful to know that the model does screen very well relative to existing and planned EVs on price per unit of range.

(2) Benchmark our volume base case for each Tesla model against segment leaders within each relevant category. This has the impact of driving up our Model 3 estimates, offset by a slight reduction for Models S and X.

(3) Revisit our well-towheels analysis of various fuel types including EVs under the current low gas price environment.

"The conclusion being that while the current payback of 9.5 years seems long, this should shorten quickly with lower battery costs and fleet driven mobility," the analyst said.

On the back of this analysis, the firm's base case volumes and EPS estimates rise by an average of 11% and 17% from 2018-2025 (and their downside case by 5% and 10%, respectively). They also raise the probability of their upside case – where Tesla goes from being merely successful to being disruptive, to 35% from 25%.

The key risk for the stock are free cash flow burn, sustained Model X orders, and Model 3 execution.

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 $253.75 yesterday.

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