Deutsche Bank Maintains Buy On Tesla Following Expansion Of Model S Warranty
In a research note issued today, Deutsche Bank analyst Rod Lache maintained a Buy rating on Tesla Motors (NASDAQ:TLSA) with a $310 price target, following the news that Tesla is expanding the warranty on the 85 kWh version of its Model S to 8-years and unlimited miles from 4 years or 50,000 miles.
Lache wrote, “We believe that 100% of the 39,000 units produced to date will ultimately receive modifications, likely at <$200/vehicle (i.e. $7.8 MM). We are adjusting our 3Q estimate for this. We also expect slightly higher warranty accruals for new vehicles produced during Q3. Importantly, Tesla appears to be making significant gains in quality such that their warranty accrual per unit will likely decline throughout 2015 despite the upgraded (longer duration) coverage. We’d note that as of Q2, Tesla’s warranty accruals were $2,661 per unit. This compares with accruals in the $1600 range for luxury OEM peers. Over time, Tesla believes that electric powertrains will prove to be more reliable than internal combustion powertrains. While this has yet to be proven, we believe that warranty represents a significant opportunity for cost improvement. We’d buy TSLA on any weakness associated with this story.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Rod Lache has a total average return of 19.1% and a 70.2% success rate. Lache has a 0.8% average return when recommending TSLA, and is ranked #176 out of 3263 analysts.