In our October 2013 newsletter, we set a $212.50 price target on Tesla by October 2014. We expressed the importance of monitoring the market for new electric vehicle entrants as risk factors associated with the stock moving forward.
While BMW's i3 is trying to make a splash at a lower price point in the 40K area, the car only offers 115 miles of range compared to 200 to 260 miles for the 2 versions of the Model S. The BMW i8 is the aesthetically pleasing brother of the i3 featured in Superbowl ads, and is expected to retail for about 43% more than the Telsa Model S performance sedan capable of 260 miles of range. (136K vs 95K) The BMW i8 series is expected to ship in the second half of 2014. We do not view these offerings as serious threats to Tesla's momentum in the next 12 months.
Earnings Rundown
Back in October 2013, Tesla's consensus earnings for 2014 were $1.85 for 2014 and analysts saw $3.34 per share for 2015. We believed Tesla would earn 60 cents for 2013, $1.70 for 2014 and used the projected 2 year growth rate of 144% to arrive at a forward P/E of 125 times 2014 earnings to develop at our initial $212.50 target price by October 2014. Now that we have reached these price levels 8 months early, it is important to look at current earnings guidance.
Tesla beat final 2013 estimates of 64 cents and delivered 78 cents per share for this past year, and is expected to earn $1.59 in 2014 and $3.00 in 2015. This represents $104% earnings growth in 2014 and 89% growth in 2015. Since many estimates have not adjusted for an accelerated 2014 earnings picture, it is appropriate to use a 2 year projected growth rate as we did late last year when we arrived at 144% growth from 2013-2015, when we projected 125 times our 2014 earnings estimate of $1.70 to arrive at our first target price of $212.50
New Target Price
Now that 2013 is behind us, the projected 2 year growth rate average for 2014 and 2015 is 96.5%. We will continue our long coverage of the stock and apply a forward multiple of 90 times 2015 current consensus estimates of $3.00 and set a revised price target by February 2015 of $270.00, 27% above our previous target price of $212.50.
Risks
Chief risk factors in the next 12 months include the companies ability to expand the supercharger network internationally, improvements in battery technology to expand profit margins, the operation expenses associated with developing and launching the Model X SUV, sales of the Model X domestically and overseas, operational expenses associated with expanding manufacturing capacity and building a giga battery plant, government subsidies related to electric cars, government investigations or recalls related to fires and accidents, public perception related to fires and accidents, and the emergence of viable electric car competitors.
Dislosure
Foundry Stock Review and its contributors have no positions in Tesla (TSLA) the security detailed in this blog as of 2/20/2014. Periodically, Foundry Stock Review or its contributors may initiate a position in a stock covered in this blog. If we do initiate a position in any security we cover prior to publication, we will disclose the position here in our disclosure. This stock disclosure is not a recommendation to purchase or sell any security.
Disclaimer
Foundry Stock Review is an earnings focused investment newsletter. Foundry Stock Review, LLC is not a registered investment advisor and the data contained in this newsletter has been gathered from external sources and is believed to be accurate as of publication. The content of this blog is for information purposes only and is not a solicitation to buy or sell any individual securities. It is important that you consult with your investment advisor and tax advisor before making investment decisions. Past performance is not indicative of future results
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