Tesla: $316 per share Here We Come

By Ben Levisohn

So many analysts base their bullish outlooks for Tesla on its long-term potential that it’s refreshing to see one that’s looking out only to 2016.

That’s exactly what Pacific Crest’s Brad Erickson has done with his initiation of Tesla at Outperform today. He explains:

When adjusted for growth relative to both its auto-making peer group and high- growth tech companies, we view Tesla as attractively valued, particularly as the Street begins appreciating the growth trajectory heading into 2016. With a 2013-2016 revenue and earnings CAGR of 66% and 117%, we are initiating coverage of Tesla at Outperform with a $316 target based on 4x EV/2016 revenue. We are giving the company credit for hitting its stated annualized delivery goal exiting 2015, but believe meaningful upside potential to our estimates remains if production is able to ramp faster.

With valuation as a backdrop, we like Tesla for four primary reasons: (1) we think the Street is overly discounting the ramp into 2016; (2) we think demand remains healthy and view a fall-off in the next several quarters as very unlikely; (3) we believe optimism around the launch of the Model X is likely to continue to rise; and (4) near-term accountability for major long-term deliverables is relatively low. Gigafactory completion and the Model III ramp are two to three years away, which doesn’t reduce their importance, but does mitigate near-term execution risk.

Shares of Tesla Motors have gained 1.6% to $242.40, leaving more than 30% of upside to Erickson’s $316 target.