How Will Tesla Motors (TSLA) Stock React to This Positive Analyst Note?

NEW YORK (TheStreet) -- Tesla Motors (TSLA) is seeing sustainable growth in China, according to a note written by Goldman Sachs analyst Patrick Archambaul on Wednesday. 

Archambaul calculated close to 4,000 reservations and down payments in the country for the company's Model S sedan as of the middle of September.STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Archambaul also noted that any growth for the electric vehicle maker in China will be heavily influenced by the company's ability to secure electric vehicle subsidies from the Chinese government for its cars.

"With distribution likely to be the real pinch point shorter term, we think the strategy of leveraging local outsourced domestic service location makes sense for expanding distribution and service, as it's very scalable and cuts down on\ upfront investments for things like body work and painting. From all indications demand appears very strong, and Tesla has ambitious targets. Industry officials we spoke to suggested that Tesla reservations had achieved 4,000 in China as of mid Sept," said Archambaul.

Tesla shares are down 0.8% to $248.40 in early market trading today.

TheStreet takes a deeper look at Tesla's future here.

TheStreet Ratings team rates TESLA MOTORS INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate TESLA MOTORS INC (TSLA) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and generally higher debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • TSLA's very impressive revenue growth greatly exceeded the industry average of 11.3%. Since the same quarter one year prior, revenues leaped by 89.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, TSLA's share price has jumped by 58.71%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • TESLA MOTORS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TESLA MOTORS INC continued to lose money by earning -$0.71 versus -$3.70 in the prior year. This year, the market expects an improvement in earnings ($1.10 versus -$0.71).
  • The gross profit margin for TESLA MOTORS INC is currently lower than what is desirable, coming in at 34.80%. Regardless of TSLA's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, TSLA's net profit margin of -8.04% significantly underperformed when compared to the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Automobiles industry. The net income has significantly decreased by 102.9% when compared to the same quarter one year ago, falling from -$30.50 million to -$61.90 million.
  • You can view the full analysis from the report here: TSLA Ratings Report
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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