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Why share Analysts Keep Chasing Tesla Higher

Tesla Model X - Why share Analysts Keep Chasing Tesla Higher

By Chris Lange

Tesla has been upgraded by several analysts of late. Deutsche Bank upgraded the stock on Monday on the heels of a very positive analyst initiation from Pacific Crest last week. Both analysts see Tesla’s stock price marching above $300.

What it is that these analysts like so much?

In its most recent earnings, Tesla reported continued deliveries and revenues growth. Despite the growth, Standard & Poor’s issued Tesla a junk bond rating on its ratings review.

Deutsche Bank raised Tesla to Buy from Hold, and it hiked up the price target to $310 from $220. Deutsche Bank’s analyst Rod Lache expects that Tesla will have a much higher growth rate than previously experienced. This is in part due to lower production costs.

The analyst has also reassessed Tesla’s production estimates. The report suggests that these estimates may prove to be on the conservative side after considering that Tesla expects to close out 2014 with 50,000 units and 2015 with 100,000 units.

These were raised for the following years:

  • 2015: 60,000 up from 51,000
  • 2016: 100,000 up from 60,000
  • 2017: 129,000 up from 83,000

Last week, Pacific Crest had initiated coverage on Tesla with an Outperform rating. The firm assigned a target price up at $316. Considering the adjusted growth in both its industries of auto-manufacturing and technology, the analyst projected that Tesla matches up well against other auto manufacturers and is projected to have a high growth trajectory going forward into 2016. Pacific Crest saw an even greater potential for Tesla if it hits its delivery goals, with even higher upside if the production can increase quicker.

Analysts continue to view Tesla very favorably despite Wall Street seemingly discounting the planned production increase for 2016. Another factor affecting analysts’ ratings is the launch of the Model X. This optimism and demand surrounding the Model X are highly anticipated and may very well impact the production and sales after its release in early 2015.

Tesla shares were up almost 5% at $260.00 in early Nasdaq afternoon trading on Monday. This is only $5 shy of the stock’s 52-week high and its all-time high. Monday’s move now marks close to a 10% gain from a week ago. Tesla’s 52-week range is $116.10 to $265.00, and the consensus analyst price target is down just under $235.00.