Tesla's (TSLA) Giga-Factory Seen Improving Costs; Wedbush Raises PT to $295

February 27, 2014 7:53 AM EST
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Price: $1,075.58 +3.63%

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Wedbush maintained an Outperform rating on Tesla Motors (NASDAQ: TSLA) and raised its price target to $295.00 (from $225.00). Comments follow an annoucement on its planned construction of a 35GWh giga-factory.

Analyst Craig Irwin said, "We are raising our 2017 earnings forecast primarily on higher gross margin assumptions as Tesla indicated they expect costs to some down significantly during the first year of volume production at the new facility."

"Cell production capacity will be 35GWh with pack assembly capacity of 50GWh, which Tesla indicated would be sufficient to support production of ~500,000 vehicles. Tesla’s direct investment will be ~$2bn of a total ~$4-$5bn capital investment. The final production site is still being selected and initial production is planned for 2017 . . . The giga-factory is expected to drive over 30% lower costs, which we expect to be cumulative on roughly 15% to 25% cost gains expected by '16 from current production . . .Specific details we would look for related to the facility include the chemistry of cells slated for production, and potential for solvent-free manufacturing. These could lower costs by 40% and 50%, respectively, which would raise visibility."

Irwin expects strong investor appetite for the company's convertible notes offering.

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 $253.00 yesterday.


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