Tesla's Model S cheered by analysts
SAN FRANCISCO (MarketWatch) -- Industry analysts, fresh from Tesla Motors' much-anticipated Model S rollout, summed up the event Monday in a burst of positive reviews of the car and the company.
Consumer enthusiasm for Tesla's first four-door vehicle has been running high. Reservations for the Model S, priced between $50,000 and $90,000, have hit 11,000 vehicles, more than half of the company's planned 20,000-unit annual output.
Analysts at Needham's & Co. predict Tesla's overall 2013 sales, which would include the two-seater Roadster it launched in 2008, at about $1.48 billion, up from $1.35 billion in 2012, with operating earnings per share next year of 23 cents a share.
Needham analyst Michael Lew said he expects the Model S gross margins to eventually reach 25%, enabling the company to finally break even by mid-2013.
Given all the buzz over the Model S, most analysts are leaving their buy recommendations on Tesla stock unchanged. Their 12-month share-price targets on the company range from $39 to $42.
Tesla's (TS) Nasdaq-listed shares are currently trading at $32.89. The stock debuted in July 2010 at $17 a share.
Lew called his $40 price target conservative given trends toward broader adoption of electric vehicles globally, with Model S sales serving as a "positive catalyst for improved industry sentiment."
Tesla itself sees the Model S as an important step in taking all-electric cars mainstream. It is also an important building block in its effort to develop a full line of models, with a Model X crossover SUV slated to start production in 2013.
Market trends are less predictable as there are no guarantees the company can keep costs and expenses low enough to ensure market affordability, competitive pricing or even continued government support for the purchase of electric vehicles. Currently, Tesla's U.S. purchasers are eligible to receive a $7,500 federal tax credit for buying electric.
When it comes to cost-comparisons, analysts at Pacific Crest Securities cautioned the Model S may suffer when stacked up against the BMW 5-Series, Mercedes-Benz E Class, Audi A7 and the Porsche Panamera, which all come equipped with more amenities.
"Tesla's interior just looks less expensive and less refined than the likes of BMW and Audi," said Pacific Crest's Ben Schuman.
At the same time, Schuman said what the Model S lacks in amenities, it makes up in storage space and seating capacity.
Early customers are also likely to overlook a few shortcomings for "the unique driving experience and exclusive green/cool factor" the Model S provides, Schuman added.
Pacific Crest said that with the sedan now in production, Tesla expects to see Model S reservations of 5,000 a quarter through the end of the year, up from 2,000 in the first quarter.
Most analysts are confident Tesla will reach those projections, despite Barclays analysts reporting the company has acknowledged "some cancellations."
To be on the safe side, Pacific Crest is leaving its Model S quarterly order rate at 2,500, or half the company's projection.