Report: Tesla Expects To Sell 500,000 Cars, Europe Model S Demand Strong
Goldman Sachs is out with a note on Tesla Motors, after the company’s own Patrick Archambault took a tour of the California automaker’s Fremont manufacturing plant earlier.
And even though the analyst has a neutral rating on the company, he filed a report on four new things he learned, mostly all positive; which caused the stock to have a massive day on the open market, closing at $110.33, up $13.25 (13.65%), giving the company a huge $12.75 billion dollar market cap.
Here are the analyst’s notes via Business Insider:
- Demand looks strong. In Europe, the order rate is about 200/week with “highest per-capita demand from Nordic countries.” They expect Germany to become one of their biggest markets, and in Asia, they expect China to drive demand. In the longer-term they expect to sell 500,000 vehicles. The breakdown: “Gen 3 sedan (around 200K units), Gen 3 SUV (about 150K units), Model S/X (roughly 90K units) and the next Gen Roadster.
- On the production side the company reported a few improvements that should help support margins. 1. The number of temporary workers have decreased since the start of the year. 2. Less waste at supplier and production sites. 3. Full time employee work hours being lower to 40-50 hours per week, from 60-70 hours per week. 4. “Improvement in logistics costs.”
- Revenue from GHG/CAFE Credits: It has been argued that Tesla’s margins are driven by its zero emission vehicle (ZEV), greenhouse gases (GHG), and Corporate Average Fuel Economy (CAFE) credits. And that the many of these could disappear if the government changed its mind. “Tesla believes that revenues from these credits [GHG/CAFE] are far more reliable and sustainable than from the sale of ZEV credits,” according to Archambault. (Editor’s note: $17.1 million was realizd from GHG/CAFE credits in Q1)
- “The 25% gross margin target is more of a challenge, in our view.” Tesla reported 17% gross margin in Q1. But some like Donn Vickrey at Gradient Analytics say the Q1 margin was closer to 5.7%, when excluding credits.
Other items of interest from the Goldman visit/report:
- they expect Tesla to start delivering the Model X in 2015
- gen 3 production by 2017
- to begin 2014 at a production rate on the Model S of between 23,000 and 25,000
- production team now is aiming to get current production (20,000 units) onto a single shift (currently body assembly and finished assembly are running 2 shifts), then to be able to increase production (if needed) to 40K by returning to 2 shifts
- Tesla sees kWh costs to decline to under $100 over the next 10 years, which is down about 75% over today
And some other calculations on Tesla’s recent market moves via WSJ:
- 104% – The amount Tesla has risen in May.
- 217% – The amount Tesla has risen in the past 3 months
- 2,870.6 – The price to forward earnings estimates for Tesla, as of Tuesday’s close, according to FactSet. The data provider has full-year 2013 earnings pegged at 4 cents a share. Full-year 2014 is expected to go up to $1.01 a share, which would put its price-to-earnings multiple at a still lofty 95.7x