Tesla has been one of the best performing stocks in the Nasdaq this year, gaining 275% year-to-date. Led by CEO Elon Musk, the company has enjoyed a tremendous amount of good publicity, and a higher share price to boot. Not everyone, however, sees the run continuing.
Goldman Sachs analyst Patrick Archambault sees Tesla at the best case being worth $113 per share, and $58 on the low end. His target price is $84 per share, some 50% lower than where shares are currently trading.
In the bear case, Archambault notes Tesla could sell 105,000 cars, including 50,000 Model S units, and 55,000 of the next-gen model, with a 14.6% operating margin. That would allow the company to earn around $6 per share. Applying a 20 multiple on it would give an implied $120 per share value, but a 20% discount brings this to $58 per share.
For 2013, Tesla has said it expects to deliver 21,000 Model S units. The company is expected to release second quarter earnings soon, though an exact date has not been given.
In the bull case, Archambault assumes Tesla could capture 3.5% of the global market, as it competes with brands like Audi, BMW and Mercedes, selling 200,000 cars. "The 3.5% market share assumption is consistent with the typical 3-5 year share gains seen by the most successful industry players across multiple luxury sub-segments over the past decade," Archambault wrote in his note. With a 15.2% operating margin in this case, (Tesla has stated 15% operating margin guidance previously) Tesla shares could be worth an implied $113, still below where shares are currently trading.
While the bull and bear cases are extremes, Tesla could conceivable be worth an implied value of $83, assuming the company sells 150,000 cars, of which 53,167 are Model S and Model S vehicles, with the rest of the sales coming from the highly anticipated next-gen car.
Tesla has been the envy of seemingly every car company, and perhaps other industries as well this year, as the amount of good publicity generated by Musk, the company and outside reports have been a sight to behold. Consumer Reports gave the Model S a 99 score, its highest score ever. Countless industry blogs and websites have deemed Tesla as having revolutionized the electric car industry. Morgan Stanley analyst Adam Jonas has called Tesla America's "fourth automaker," behind Ford, GM, and Chrysler.
Palo Alto, Calif-based Tesla recently became profitable for the first time in its ten-year history, as it recognized 4,900 cars as revenue in its first quarter. Revenue rose 83% year-over-year to $562 million in the first quarter. Those are astronomical numbers, even more so when you factor in that Tesla is still a car company.
Then there's Musk. The effervescent, charismatic CEO has been able to spin good public relations for his product, turning his Twitter timeline into a must-follow, as he generates excitement with seemingly every tweet.
While Tesla's incredible share price run may not have much more left in it, and the naysayers are trying to make their mark, Tesla shares may soon hit the brake (pun intended) for a while. However, as the industry leader and having built a brand following perhaps as loyal as Apple, I don't expect Tesla shares to stay stuck in "neutral" very long.