We Believe Investors Underestimate The Value And Power Of The Tesla Brand, Says MLV
In a research report published today, MLV analyst Carter Driscoll initiated a coverage on shares of Tesla Motors (NASDAQ:TSLA) with a Buy rating and a $300 price target, which represents an upside of 30% from where the stock is currently trading.
Driscoll wrote, “Tesla Motors (TSLA) is a disruptive manufacturer of all-electric (EV) light-duty passenger vehicles. Our investment thesis is predicated on the company (1) using its world-class EV sedan (and soon crossover SUV model) to become the EV category leader and build brand equity; (2) using a platform approach to build out its vehicle portfolio (Model X crossover and Model III mass market vehicle) to take market share in the global automotive market; (3) building the largest lithium-ion battery manufacturing plant in the world to drive down material costs; (4) longer-term selling battery packs for distributed energy storage and backup power uses. We believe our forecasted ~40% CAGR revenue and ~85% EPS growth, respectively, from 2014E- 2019E, is not fully priced into the stock.”
The analyst continued, “We believe investors underestimate the value and power of the TSLA brand. Innovation, media recognition and ‘environmental awareness’ towards adoption of cleaner transportation have created an appealing brand closer to that of Apple, with its high-quality, innovative products. Just as he did at Apple, George Blankenship helped build the global retail store strategy in high-traffic retail locations as a ‘consumer experience’ that elevates the brand. Even if the mass consumer ultimately can only afford the upcoming Model III rather than the Model S or X, he/she can experience the product and talk with a TSLA specialist. We posit that there is an emotional appeal of the brand with global consumers that is difficult to quantify but may be worth billions of dollars. So we view the strategy of selling luxury cars today while paving the way (by building latent demand) for next-generation, mass-market products as one in which the Tesla brand is built to last.” The analyst added, “The range of the Model S, its performance and feature sets are differentiators. We believe the Model S, which won Motor Trend’s and Consumer Report’s ‘Car of the Year’ in 2013, still has no direct competitors in the luxury EV segment and is constantly being improved. Once you consider the car’s leading range, performance (maximum torque, acceleration, handling, etc.), safety (5-star rating in every category from NHTSA, which only ~1% of all cars receive) and include zero tailpipe emissions, there really is no competing vehicle available today.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Carter Driscoll has a total average return of -8% and a 37.5% success rate. Driscoll has a 7.2% average return when recommending TSLA, and is ranked #2825 out of 3352 analysts.