Tesla Motors Inc (NASDAQ:TSLA) and Canadian Solar Inc (NASDAQ:CSIQ) both attract positive analyst reviews based on beliefs that the companies will soon outperform. Canadian Solar seems under-priced according to one analyst, and Tesla is soon to boom according to another. Here is breakdown of these two innovative companies.
Tesla Motors Inc
Last year, Tesla faced some downturns in production and cost overruns that resulted in pressure on the company’s gross margins. However, the company’s recent developments and noteworthy initiatives attracted attention and positive ratings. Analyst Bill Selesky of Argus Research weighed in on Tesla and upgraded the stock from Hold to Buy with a price target of $333.
Selesky presents the adversities Tesla experienced in the past 18 months, explaining, “The wider-than-expected adjusted loss reflected production inefficiencies, higher labor and overhead costs, and the expansion of the company’s service centers and battery-charging network.” The analyst, however, is optimistic on the company’s reaction to these events, commenting, “We believe that the company has made progress in addressing these issues and that it is poised for much stronger performance in the coming quarters.”
The company’s additional developments are positive catalysts for the analyst. Specifically, the completion of ‘Gigafactory,’ a battery production plant in Nevada; the launch of the “Autopilot” driving system; the manufacture of batteries for non-automobile uses; and overall production efficiency. Selesky states his projections for Tesla in numerical terms, explaining, “We are initiating a 2017 non-GAAP EPS estimate of $3.21, more than double our 2016 forecast. We project revenue of $11.18 billion, up 31% from our 2016 estimate. Our forecasts assume improved production efficiency, modest increases in both gross and operating margins, and continued global economic growth. Our estimate is above the consensus forecast of $3.04.”
According to TipRanks, Bill Selesky’s ratings have a 63% success rate, delivering a 3.9% average return per recommendation. In addition, in the past 3 months, 8 analysts including Bill Selesky Give TSLA a Buy rating, 3 analysts remain on the sidelines, and 4 give the stock a Sell rating. Bottom line, these ratings set a $253.92 12-month average price target, marking a 7.68% upside.
Canadian Solar Inc
Analyst Carter Driscoll from FBR & Co. weighs in on Canadian Solar and its stock valuation in relation to new company developments. CSIQ announced several exciting developments to the recently, including the launch of new successful products in target markets such as the U.S., U.K., Brazil, Japan, China, and the Middle East. Further, the company released a next-generation cell and module product, and is currently planning the launch of its Yield Co.
Driscoll doesn’t believe the stock price of the company fully considers the many valuable additions within the company’s development pipeline, the module cost leadership position, and its potential value increase from the Yield Co. launch. The analysts explains, “We believe that Canadian Solar has a road map to maintain its cost leadership position in modules, monetize its large project development pipeline through a Yield Co. launch (or pursue other alternatives), and continue to invest in new technologies that keep the company on the leading edge of the solar equipment supply chain.”
Though there has been some concern by investors regarding CSIQ’s late-stage project pipeline, which fell from 2.5 GW to 2.0 GW, Driscoll assures that there is a reasonable explanation that follows suit. Namely, the analyst mentions the pipeline reduction by project sales, reclassification of Chinese projects from late stage to early stage given the ongoing lack of reimbursement for feed in tariffs, and finally, a revaluation of a project’s MW potential which excluded the estimated tax equity portion. They elaborate claiming that due to these reasons, “Overall, we are not concerned with the slowdown in the late-stage pipeline.”
In regards to whether market conditions will allow the company to launch its Yield Co., Driscoll believes this will be probable, commenting, “Market conditions have recently caused a disruption in Yield Co. economics, but we believe the company has the pipeline to support it and recognizes the long-term value in utilizing the buy-to-hold model.”
The analyst reiterates an Outperform rating on the stock, with a total valuation of a $32 price target.
According to TipRanks, all 6 analysts who have recently weighed in on the stock are bullish. The average 12-month price target between these 6 analysts is $33.20, marking a 65% potential upside from current levels.