Analysts Debate: Is Tesla Motors Inc (TSLA) a Top Stock?

On the financial side, Tesla is seeing some major progress. Revenue for the fourth quarter jumped 500% from the third quarter as production ramped up. Production run rate hit 20,000 annually by the end of the year and the result is an expected profit in the first quarter of this year and will be near breakeven on operational cash flow.

The future is even brighter given the company’s pipeline. Toyota Motor Corporation (ADR) (NYSE:TM) is buying powertrains for the RAV4 EV and the company is progressing on its Mercedes-Benz B-Class EV program. The Model X, a crossover vehicle, will begin production in late 2013, bringing more scale to Tesla’s manufacturing. If sales go as well for the Model X as they did for Model S, it could be very profitable next year.

Projecting  Tesla Motors Inc. (NASDAQ:TSLA)’s profits involves a lot of guesswork, but if we assume 40,000 units annually at an average price of $60,000 and the 25% gross margin, Tesla could make a $600 million gross profit by 2014. That’s not bad for a company so early in its development and it makes me cringe a little less at the $4.5 billion price tag on the stock.

Visionary companies don’t come along often but Tesla has the makings of one. I’ll take a chance on this stock and give an outperform call.

Sean’s take
I’ll hand it to Elon Musk for definitely giving consumers something to talk about. The man is without question a visionary who’s comparable to few others. But as an investment, buying Tesla Motors is about as appetizing to me as eating dirt. I have quite a few concerns about the longevity of the business that will definitely keep me on the other side of this trade from Travis.

To begin with, Tesla Motors Inc. (NASDAQ:TSLA) claims to have 20,000 Model S sedans sold for 2013. That’s a fine figure, but doesn’t it seem a bit disconcerting, then, that it was supposed to deliver 2,500 Model S sedans in its most recent quarter yet it fell 100 short? That’s particularly worrying given that it expects to ramp up to 4,500 deliveries in the first quarter. This speaks to the very thing that got Tesla’s Model S in trouble with consumers and investors in the first place: delays, delays, delays. Tesla won’t speak of any delays now, but the numbers clearly aren’t adding up to the expectations as per the norm. As icing on the cake, its Model X was originally scheduled to begin production in late 2013. That’s now been moved back to late 2014… surprise!