Tags: tesla | stock | soars | earnings

Tesla Stock Soars as 2nd Quarter Earnings Defy Expected Loss

Thursday, 08 Aug 2013 05:09 PM

 

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Shares in electric sports car maker Tesla Motors Inc. jumped 18 percent to a record high on Thursday, after surprisingly strong second-quarter results convinced investors the company has found a route to sustainable profits.

Tesla shares were up 14 percent, or $19.25, to close at $153.48 on the Nasdaq. Nearly 20 million shares had changed hands, more than double the stock's 10-day moving average.

Tesla's shares have more than doubled since it reported its maiden profit in the first quarter of the year -- hitting new highs most weeks.

At least seven brokerages raised their price targets after Tesla reported its second profit in a row late Wednesday, by as much as $69 a share.

Their targets now range up to $187, compared with the new record share price of $158.88, struck on Thursday on heavy volumes after Tesla said it had sold more of its popular Model S sedans than expected.

"The bull argument for the stock could be that the CEO, Elon Musk, is the next Henry Ford - i.e. mass market success would be assured," said Barclays Capital analyst Brian Johnson, who raised his target on Tesla to $141 a share from $90.

The Model S is the best-selling U.S. electric car despite a starting price of more than $70,000. The company sold 5,150 cars in the second quarter and said on Wednesday it expects to reach an annual production rate of 40,000 by late next year as it starts selling in Europe and Asia.

With so many alternative-energy firms struggling -- such as solar power companies and other electric car companies -- analysts say Tesla appears to have broken away from the pack.

"We look at Tesla as not only an auto manufacturer, (but) a trend-setting consumer brand, and a leader in technology that dozens of companies both larger and smaller have failed at perfecting," Robert W. Baird & Co. analyst Ben Kallo wrote in a client note on Thursday.

Kallo raised his price target on Tesla's stock by $69 to $187, saying the Model S is an attractively priced luxury vehicle with triple the range of many competitors.

As well as boosting sales, Tesla lowered component costs in the Model S, contributing to its second-ever quarterly profit.

"Tesla's stronger-than-expected set of (second-quarter) results should do much to help assuage concerns regarding the steep uphill climb to meet management's aggressive medium-term margin targets," J.P. Morgan Securities analyst Ryan Brinkman said in a note.

Gross margins expanded by 5 percentage points to 22 percent and the company said it was on track to achieve margins of 25 percent in the next quarter.

Goldman Sachs analyst Patrick Archambault raised his price target to $95 from $84 on Tesla's stock.

Archambault last month sparked the biggest one-day drop in Tesla's shares since January 2012 by casting doubts on the company's ability to raise operating margins beyond 15.2 percent in the long term.

The analyst said he was now factoring in a slightly stronger margin trajectory following better second-quarter profitability, but left his rating on Tesla unchanged at "neutral."

Five of seven brokerages who raised their price targets on Tesla's stock on Thursday now value the shares at $141 or more.

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