Tesla Surging: What Wall Street's Saying

Updated from 10:47 a.m. to include thoughts from Morgan Stanley analyst.

NEW YORK (TheStreet) -- Tesla Motors (TSLA) shares surged 9.5% to $212.00 in Thursday trading after the electric vehicle maker posted fourth-quarter results that were better than expected, and 2014 looks to be even brighter.

The Palo Alto, Calif.-based firm earned 33 cents a share, generating $761 million in revenue during the quarter, on a non-GAAP basis. Tesla delivered 6,892 Model S units, and had a 25.2% non-GAAP gross margin. The company believes it has room to expand gross margins even further, as economies of scale and volumes continue to increase. "We think an automotive gross margin of 28%, excluding potential ZEV credit sales, is a reasonable target for Q4 2014, even if a lower option take rate is assumed," the company said in a letter to shareholders. 

Analysts surveyed by Thomson Reuters were expecting Tesla to earn 21 cents a share on a non-GAAP basis, generating $677.36 million in revenue.

Last month, at the Detroit Auto Show, Tesla said it delivered 6,900 Model S units during the fourth quarter.

TSLA ChartTSLA data by YCharts

For 2014, Tesla said it expects to deliver 35,000 Model S units, and will up production to 1,000 cars a week, as the company continues to address bottlenecks that it hopes will "improve significantly in the second half of 2014."

For the first quarter, Tesla expects to produce about 7,400 Model S units, but will actually only deliver around 6,4000 vehicles due to continued supply constraints.

Touching on the Model X, Tesla said it expects "to have production design Model X prototypes on the road by end of year and begin volume deliveries to customers in the spring of 2015." On the call, Musk said Model X demand is "very high," despite there being no advertising for the upcoming sports utility vehicle. He wouldn't disclose the amount of reservations for the Model X, but noted "the fish are jumping in the boat," when talking about demand.

Tesla also noted it would have news on the Gigafactory soon. "This will allow us to achieve a major reduction in the cost of our battery packs and accelerate the pace of battery innovation," the company said in the letter. "Working in partnership with our suppliers, we plan to integrate precursor material, cell, module and pack production into one facility. With this facility, we feel highly confident of being able to create a compelling and affordable electric car in approximately three years. This will also allow us to address the solar power industry's need for a massive volume of stationary battery packs."


On the call, CEO Elon Musk said that he expects to have more than one partner for the Gigafactory, with Panasonic likely being one of them.

Analysts were mostly positive on the results, with several of them raising their price targets. Here's what a few of them had to say:

Jefferies analyst Elaine Kwei (Buy, $220 PT)

"TSLA posted 4Q non-GAAP EPS of $0.33, beating our estimate of $0.29 and consensus of $0.23. The strength came from higher ASPs on a richer mix of sales and deliveries to Europe. We think 2014 guidance for 35,000 deliveries, 28% gross margin by 4Q, and a production rate of 1000 cars/week by yearend upsided expectations. TSLA plans to hold a special call/announcement on its "gigafactory" for battery production sometime next week; no details were provided."

Deutsche Bank analyst Dan Galves (Hold, $220 PT)

"We lay out a case below that includes an optimistic scenario that Tesla gets to 450k units near the end of the decade at an EBIT margin of 15% (significantly higher than BMW, slightly below Porsche). This would drive about $19 of EPS. Even if Tesla were to get a 20x multiple at that time, the stock should trade at around $250 at the end of 2014 (20x 2019 EPS of $19, discounted back 3 years at 15%). In addition to the tight valuation, we believe the ramp in operating expenses, uncertainty around the giga-factory, uncertainty around distribution network needs to support higher volumes, and multiple competitor vehicles entering the market will make it difficult for investors to get a clear picture of the true late-decade earnings power/margin profile of the company. We'd look to get more constructive again on pullbacks or if the stock remains range-bound for an extended period."

Wedbush Securities analyst Craig Irwin (Outperform, $225 PT)

"We see strong positives in Tesla's credible path to longer-term battery cost reduction and the Gen-III vehicle target costs, and what we believe will be a receptive buying public willing to purchase EVs while retaining reasonable expectations for these vehicles. Tesla's multi-year lead over credible competition suggests the company is well positioned to deliver an aggressive volume ramp."

JPMorgan analyst Ryan Brinkman (Neutral, $137 PT)

"TSLA met its long-standing 25% 4Q13 gross margin guidance (widely not believed prior to 3Q earnings), reporting 25.2% excluding ZEV credits. Excluding all credits, gross margin tracked 23.7% in 4Q vs. JPMe 24.6%, benefitting from $15 mn of GHG credits vs. the $8 mn we had modeled. TSLA attributes +400 bps sequential gross margin improvement to a combination of volume-based purchase price reductions, increased manufacturing and supply chain efficiency, and fixed cost leverage, guiding for more of the same in 2014 (28% by 4Q14, which we now model)."

Morgan Stanley analyst Adam Jonas (Overweight)

"We believe we are witnessing the most disruptive intersection of manufacturing, innovation and capital experienced by the auto industry in more than a century.Tesla may be in position to disrupt industries well beyond the realm of traditional auto manufacturing. It's not just cars. Tesla remains our top pick in US autos."

--Written by Chris Ciaccia in New York

>Contact by Email.

More from Technology

Video: Rising 10-Year Yields Don't Necessarily Make Stocks Less Attractive

Video: Rising 10-Year Yields Don't Necessarily Make Stocks Less Attractive

Alphabet, Coca-Cola, Caterpillar Reveal Earnings Season Will Be Awesome

Alphabet, Coca-Cola, Caterpillar Reveal Earnings Season Will Be Awesome

CHART: Here's How Much Apple Stock Has Lost in Value in the Last Five Days

CHART: Here's How Much Apple Stock Has Lost in Value in the Last Five Days

Wall Street Is Totally Forgetting Apple Will Be Giving Away Tons of Cash in 2018

Wall Street Is Totally Forgetting Apple Will Be Giving Away Tons of Cash in 2018

How Did Caterpillar Get Its Name?

How Did Caterpillar Get Its Name?