Analysts Remain Bullish on Tesla Despite Layoffs in China


By Sarah Roden

Tesla (NASDAQ: TSLA) has already had a fair share of media coverage in 2015, from reports about trimming its workforce in China to rumors about construction delays for the gigafactory.

The electric car company announced it will be eliminating 180 of the 600 people in its workforce in China. Reports differ if the cut is due to structural changes within the company or sales falling below expectations. Tesla currently has 9 stores and service centers in 6 different Chinese cities, but many find Tesla’s charging mechanisms prohibitive as apartment buildings are more common than single-family homes with garages.

Many people are under the misconception that charging a Tesla is difficult, though it only requires an outlet. Tesla has been investing heavily to combat this sentiment. The company is aggressively expanding its charging network and increasing production capacity, as well as pouring funds into research and development for new and existing models.

Tesla has also been denying reports that construction on its gigafactory has been delayed. Tesla, in a partnership with Panasonic, is creating a gigafactory in Nevada that will produce lithium ion batteries. The factory is expected to reduce production costs for Tesla by up to 30% when it is completed in 2020. A spokesperson for Tesla assured that gigafactory construction is moving forward according to schedule.

On March 9th, analyst Dan Galves of Credit Suisse reiterated an Outperform rating on Tesla with a $290 price target.Galves noted, “2015 is a challenging year for demand (Model S’s 3 third year of U.S. sales, Model X not meaningfully available until late 2015, China not yet a big market).” However, the analyst continued,  “While these demand risks have been driving poor share performance, the reward is very high if Tesla can deliver 45k-50k Model S’s in this environment… We don’t believe that being production-constrained and having some minimal level of unsold inventory at dealerships are mutually exclusive. For one thing, we believe Tesla could sell more cars if they had a small number of unsold, new units at each store for the consumers that do not want to wait.” Galves is confident that Tesla garners strong demand.

Dan Galves has rated Tesla 19 times since August 2011, earning a 62% success rate recommending the electric car company with a +23.1% average return per TSLA rating. Overall, Galves has a 52% success rate recommending stocks with a +14.4% average return.

Tesla Galves

Separately on March 6th, analyst Andrea James of Dougherty & Co. maintained a Buy rating on Tesla with a price target of $325. After James toured a Tesla factory in California, she noted that the “Model X is on track for test drives and launch this summer.” She added, “Tesla appears pleased with the progress on the Gigafactory and its work with partners. The Gigafactory is essentially on plan and ahead of schedule from a timing and cost perspective.”

Andrea James has rated Tesla 11 times since May 2011 with a 64% success rate recommending the company with a +24.7% average return per Tesla rating. Overall, James has a 55% success rate recommending stocks with a +8.7% average return.

Tesla James

On average, the top analyst consensus for Tesla on TipRanks is Moderate Buy.

To see more recommendations for Tesla, visit TipRanks today.

Sarah Roden writes about stock market news. She can be reached at Sarah@tipranks.com.

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