This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Tesla: 'Automotive Nirvana' (Update 1)

Updated from 10:53 A.M. to include information about safety in the fourth paragraph.

NEW YORK ( TheStreet) -- Tesla Motors (TSLA - Get Report) shares gained 0.68% to $148.86 as Stifel Nicolaus initiated coverage on the stock, rating it a "hold."

Analyst James Albertine notes that Tesla is really making a name for itself not only in the electric car market, but the automotive market in general. "No other auto maker could (or would) have been able to capitalize on current political and consumer momentum for electric vehicles, in our view," Albertine wrote in the note. While the stock continued to climb based off positive sentiment, CEO Elon Musk's ability to create buzz, and incredible strong fundamentals, Albertine notes not all is rosy for Tesla. "Risks ahead are significant and we think under-appreciated. OEMs, parts suppliers and retailers all have TSLA locked in their sights. TSLA might have 1-2 years of order backlog to work through, but as of yet, little evidence of customer retention or conquest at lower price points."

The Model S has been a revolution to the electric car, as the company continues to sell more than it can make. In the second-quarter, Tesla delivered 5,150 units of the Model S, helping the company generate $405 million in revenue, earning 5 cents per share.

Not only is the Model S revolutionizing the electric car industry, it's revolutionizing safety as well. Earlier this week, the National Highway Traffic Safety Administration (NHTSA) awarded the Tesla Model S a 5-star safety rating in every subcategory, a rating that just 1% of all federally tested cars achieve. In a press release, Tesla noted that although the NHTSA it doesn't publish ratings above 5, the Model S managed to get a 5.4 rating in overall Vehicle Safety Score (VSS), a new record.

The NHTSA has since made a comment, further denouncing this claim on its website. "NHTSA does not rate vehicles beyond 5 stars and does not rank or order vehicles within the star rating categories. In addition, the agency has guidelines in place for manufacturers and advertising agencies to follow to ensure that accurate and consistent information is conveyed to the public," the government agency said.

As a result shares have performed incredibly year-to-date, outperforming every index and having been added to several Nasdaq-related indices as well. TSLA Chart TSLA data by YCharts

However, much of the recent run up in the stock is attributed to short-squeezes, future production and momentum, as well as fundamental shift in the automotive industry. As such, Albertine believes the company's valuation "deserves a deeper, broader fundamental analysis." He notes, "Any investor, sell-sider or otherwise bystander focused on the Model S, X or Gen III is missing the bigger picture, in our view. Our long-term sensitivity analysis provides a mechanism to assess TSLA's earnings power beyond products, pricing or penetration, and perhaps provide a deeper dive on battery costs, regulatory credits, gross and operating margin potential."

Tesla recently filed to patent the name Model E, perhaps the name of the third-generation vehicle. The filing notes "The description provided to the USPTO for MODEL E is Automobiles and structural parts therefor."

As the momentum behind Tesla continues to be a tailwind, and the company continues to raise money to further build out its operations, Tesla is increasingly looking like it's going to be a self-sufficient automotive company. On the second-quarter earnings call, Musk said some of Tesla's suppliers simply can't boost production fast enough to meet demand and that it might look to bring some stuff in-house. "90% of our suppliers are able to ramp-up and 5% have some difficulty and 4% have a lot of difficulty and 1% just can't and so we have got to replace those or in-source those items," Musk said on the call. "You can't give people a car that's 99% complete, unfortunately and there are several thousands unique parts in the car."

With the wind at its back, and the company increasingly getting more positive momentum behind it, Albertine notes Tesla has a chance to do something the automotive industry has never seen before. "In our opinion, no other disruptive force has had as much potential as TSLA looking back over the 100-plus year old auto industry. Simply put, we believe TSLA is seeking 'Automotive Nirvana'."

-- Written by Chris Ciaccia in New York

>Contact by Email.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
TSLA $214.66 1.50%
AAPL $92.54 -0.75%
FB $119.25 1.20%
GOOG $711.77 1.50%
YHOO $37.28 0.92%


Chart of I:DJI
DOW 17,718.62 +57.91 0.33%
S&P 500 2,056.05 +5.42 0.26%
NASDAQ 4,729.6070 +12.5130 0.27%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs