Tesla soars on positive analyst report

The automaker could become a major competitor in the electrical grid storage business as well, says Morgan Stanley's Adam Jonas.

By MSN Money Partner Feb 25, 2014 2:02PM
Tesla Model S sedans outside of the Tesla Factory on August 16, 2013 in Fremont, Calif. (© Justin Sullivan/Getty Images)By Mike Ramsey, The Wall Street Journal

Tesla Motors (TSLA) might be on the verge of disrupting two industries, warranting a share price of $320, says Morgan Stanley (MS) analyst Adam Jonas in a note to investors released Tuesday.

Shares surged more than 17 percent to $255.75 in midday trading on the Nasdaq after Jonas released his note.


That new share price target is up from $153. Its shares have soared following an adjusted $46 million fourth-quarter profit and reports of rising production capacity and demand.


Tesla is expected this week to announce plans to build a new battery factory along with partners that will be able to take raw materials in on one side and produce batteries out the other side, lowering the cost of battery cells. Jonas thinks that the cell production has the potential to have Tesla become a major competitor in the electrical grid storage business.


"Tesla's request to disrupt a trillion [sic] $ car industry offers an adjacent opportunity to disrupt a trillion $ electric utility industry," Jonas writes in a note titled "Nikola's Revenge: TSLA's New Path of Disruption."


He estimates that Tesla will be producing 370,000 vehicles a year by 2020, up from 22,400 last year. By 2028, the company should be over 1.1 million units of production, and the Teslas out in service could be used as back-up grid storage for the utility industry. 


Much of the volume is connected to Tesla’s planned "Gen 3" vehicle, which the company aims to put out in 2017 with 200 miles of electric range and a starting price around $35,000.


His bear case for Tesla still estimates that the company will be making 220,000 vehicles a year by 2020, warranting a $100 a share target. Porsche, a division of Volkswagen AG (VLKAY), sold a record 162,145 vehicles in 2013, for comparison.


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