Tesla Stock Skyrockets Again on Raised Morgan Stanley Price Target of $320

FEB 25 2014 BY ERIC LOVEDAY 25

Tesla Trading Way,Way Up In Late Day Action On Tuesday

Tesla Trading Way,Way Up In Late Day Action On Tuesday

Analysts at Morgan Stanley raised the price target for Tesla stock from $153 to $320 per share, while maintaining the stock’s “overweight” rating.

The Tesla Model S At The 2014 NAIAS

The Tesla Model S At The 2014 NAIAS

This new price target led to TSLA skyrocketing again to a pre-market price of over $231, and as high as $259.20 during the days trading.

Tesla’s market cap is now approaching $27 billion.

Morgan Stanley’s Adam Jonas wrote:

“Tesla is an extremely ambitious company for whom flooding the market with fun-to-drive EVs and giving competitors a headache might not be the endgame. Tesla’s limited addressable market, a long-time bear thesis on the stock, appears well up for grabs here.”

The price target hike comes as Tesla CEO Elon Musk is expected to make a formal announcement on Tesla’s giga factory battery plant.  Like the Supercharger network, the giga factory could itself be a game changer for Tesla.

Real-time quote  can be found here

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25 Comments on "Tesla Stock Skyrockets Again on Raised Morgan Stanley Price Target of $320"

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Chris O

7 months ago Goldman Sachs valued Tesla at $113 in its most bullish scenario. Now it appears Tesla stock has become the object of speculative games that is bound to end with the sound of a bubble popping.

Mint

Holy crap.

They’re going to have to generate profits of $2B/yr to justify that market cap, i.e. $5k/car net margin (not gross) for 400k cars/yr! This stock is obscenely overpriced. We’re talking about presumed success not only for the third gen car, but the fourth as well.

If I were a Tesla exec, I’d issue more shares now. Who know how long this bubble is going to last, but while it’s here, cash in on maybe 10-20% of that $27B market cap and add it to the company’s war chest.

Big Solar

247.45! Holy crap.

Someone said it on CNBC (I think) the other day – Tesla is valued as if its 4 years in the future (2018) and it is shipping 250K cars/yr.

Mint

What I’m illustrating is that it’s even more than that now. My $5k/car net figure is generous, as they’d probably need 25% gross margins and $40k ASP, and I’m assuming a higher P/E ratio than Ford or BMW.

A more realistic figure is 500k-1M cars per year.

Nix

Mint — If Tesla was shipping 250K cars/year at 25% profit margin, how much in profits would Tesla need to make from their Gigafactory to make up the difference in market cap?

Follow-up question — How many batteries would it take per year to generate enough profit to justify the rest of that market cap, if they were selling 250K cars/year, and how many batteries would it take to build 250K cars per year?

Chris O

My back of napkin calculations showed similar numbers. What Tesla needs to realize the market’s expectations is a massive battery breakthrough. The fact that it will invest in a “gigafactory” for battery production however seems to indicate that Tesla itself isn’t expecting any structural new insights in battery tech any time soon since an investment like that will necessarily lock in current battery tech. It’s fair to assume that speculators are headed for disaster here.

Mint

We don’t need massively better battery tech. The Model S has more room than any ICE based car, and there’s still room for more batteries under the seats and in the frunk.

Panasonic’s batteries are ~250 Wh/kg, and if we assume $240/kWh for today’s prices, then we’re looking at $60/kg. The bulk of the materials used are much cheaper than that. A few percent of the mass is lithium at ~$60/kg (lithium carbonate is $6k/tonne), and nickel and cobalt are about $15/kg and $30/kg respectively, but everything else is pretty cheap.

If the gigafactory can get 25% more density per kg from minor advances, and can get manufacturing/energy overhead down to $30/kg, they’ll hit $150/kWh, which is all they need to piss all over gasoline’s cost in a performance car.

Chris O

I agree that Tesla’s battery tech will go a long way. Not $320 stock value long though. Also I wonder about Model S production cost which appears to be somewhere north of $60K a pop, not consistent with the sort of mass market penetration Tesla is looking for.

pjwood

Thanks for the reference points, Mint. The rest of the market is coming along, when it comes to realizing “we’re here” with battery tech offering cheaper than status quo alternatives. This goes beyond cars, and I think that’s the stock’s uptick.

I am trying to get the research driving today’s move.

GeorgeS

How much does this appreciation in stock price help Tesla Motors.?? I guess Tesla got to pocket the money from the original sales but what about the appreciation? How many shares of Tesla stock does Tesla Motors own??

Bonaire

It just draws in the attention of the SEC who will really just kind of go “eh, what do we know – too techie for us” and walk away.

Mint
Public companies are free to issue more stock as they see fit. It may seem like a ripoff to current shareholders due to dilution, but technically the value of the share stays the same. If a $2B company has 20M shares valued at $100 each, and they issue 10M more shares at the same price (thus raising the company’s cash on hand by $1B), then a shareholder with 3M shares will see his ownership go from 15% (of the original $2B company) down to 10% (of the now $2B+$1B=$3B company), so the total value of his share stays the same. Of course, if there is low demand for those 10M new shares, or investors think the company is going to use that money on a poor/negative ROI project, the share price can drop. Obviously Tesla won’t be able to issue a billion new shares at this price, but they can do a reasonable amount. You may recall Tesla issuing new shares (~10M shares, IIRC) when the stock price shot up to $90-100, and used some of the raised capital to pay off the DOE loan, while the rest went to cash on hand. AFAIK, a company never actually owns a… Read more »
pjwood

Just cleaning up that last part. Lots of co’s own their own stock, or ‘Treasury Stock’, and it isn’t regarded as a retirement of shares to do so. IOW, shares outstanding, earnings per share, etc, are all still calculated over top of the total number of shares (including whether or not a company buys them).

Tesla’s financing, with equity raises will catch up to it. Solar City is a separate stock, and I still have a dark horse theory that the Gigafactory could begin another separate stock. If Morgan has priced in that factory’s earnings in their price target and Tesla does this, watch out below. The synergy of all three business units is almost obvious, but for Tesla to do one equity raise after another will catch up to them, in my opinion. It’s real tough to trust that the dilution of shares is more than made up for by the ROI of new, potentially risky, endeavors.

We’ll see. It’s exciting, especially if you’re in the stock 😉

pjwood

more noodling – Venture cap has “equity calls”, where people write checks expanding ownership. Traditionally, you stop doing this when you go public, and it would be as if Tesla were still making these calls, but on public shareholders, if they were to do it again. As much as we can paint the case of it making sence, with share prices high, unique shareholders, etc, it is very rare to get away with repeated dilution as a publicly traded company.

MDEV

Finances are crazy WhatsApp were sold for 19 billions an app guys common I’m not surprise of this stock valuations anymore.

Wow. TSLA stock is something else. I’m a huge believer in the company but I can’t not sell at these prices. The last of my TSLA is now sold.

offib

It’s worth over $31Billion! It gained a billion within minutes! More than Renault, close to Audi. As old as it is, it’s still absolute madness, literally printing free money!

TomArt

Oh, but The Market is rational! People make rational decisions!

Mike I

I don’t see how Tesla can make the GigaFactory announcement and NOT announce a stock offering to pay for it. The stock valuation is crazy high and they would be foolish not to turn that into cash on hand for the company. At this point in the company life-cycle, further dilution will not be a problem for stockholders because it will give the company flexibility to more efficiently execute on their business plan and achieve the scale reflected in the current stock price.

Agreed.

The only way I see Tesla not offering more stock to the public for the Gigafactory is if someone private beats them to the punch (e.g. Apple talks to Tesla and offers to invest 10B or some ridiculous figure into the GF in exchange for shares and sharing some of the battery technology or something).

Anderlan

My nose is bleeding.

Nix

The only way this valuation would make any sense, were if it priced in the future Gigafactory profits for becoming the leading supplier of batteries for both EV cars, and for consumer electronics.

That valuation would assume that Tesla would reap the lion’s share of those Gigafactory profits compared to whatever company(s) they might partner with, and that the Gigafactory wouldn’t get spun off as its own company.

This could make sense, depending upon what numbers of batteries they will be producing, and at what profit margin. I’d have to do some math, but it is possible for the Gigafactory to become a massively profitable part of Tesla’s business, if Tesla can really cut the cost of making batteries by 30% (like I’ve heard some speculation about).

ModernMarvelFan

It is okay, Yahoo was once a $400/share stock as well….

There is investing and there is speculation….

Simon

There was me thinking of buying at $34…And now it’s well in its way to being a ten bagger. I definitely saw the stock as a potential ten bagger but I was thinking of more like 10 years to get there. Can’t buy now but there will be a time…