Can Tesla Motors Keep Meeting Its High Expectations?

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With shares of Tesla Motors (NASDAQ:TSLA) trading around $250, is TSLA an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Tesla Motors designs, develops, manufactures, and sells electric vehicles and electric vehicle powertrain components. The company also provides services for the development of electric powertrain systems and components, and sells electric powertrain components to other automotive manufacturers. It markets and sells its vehicles through Tesla stores as well as over the Internet. Consumers and companies are looking to save at the pump, and what better way to do so than with electric vehicles?

Tesla Motors might be on the verge of disrupting two industries, warranting a share price of $320, says Morgan Stanley (NYSE:MS) analyst Adam Jonas, in a note to investors released Tuesday. It’s shares surged 11 percent to $241.18 in early trading on the Nasdaq after Mr. Jonas released his note. That new share price target is up from $153. Its shares have surged following an adjusted $46 million fourth-quarter profit and reports of rising production capacity and demand. Tesla is expected this week to announce plans to build a new battery factory along with partners that will be able to take raw materials in on one side and produce batteries out the other side, lowering the cost of battery cells. Mr. Jonas thinks that the cell production has the potential to have Tesla become a major competitor in the electrical grid storage business.

“Tesla’s request to disrupt a trillion $ car industry offers an adjacent opportunity to disrupt a trillion $ electric utility industry,” Mr. Jonas writes, in a note titled “Nikola’s Revenge: TSLA’s New Path of Disruption.” He estimates that Tesla will be producing 370,000 vehicles a year by 2020, up from 22,400 last year. By 2028, the company should be over 1.1 million units of production, and the Tesla’s out in service could be used as back-up grid storage for the utility industry. Much of the volume is connected to Tesla’s planned “Gen 3” vehicle, which the company aims to put out in 2017 with 200 miles of electric range and a starting price around $35,000.

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