Tesla Motors Inc: 400,000 Reasons to Love TSLA

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You know those long lines that form around the block outside an Apple Inc. (AAPL) store every time it releases a new iPhone? That’s essentially what’s been happening at Tesla Motors Inc (TSLA) right now.

Tesla Model 3

Source: Tesla Motors

Only that line is mostly on the internet, and instead of $700 smartphones, it’s $35,000, battery-powered cars that consumers can’t wait to get their hands on.

As a result, investors can’t wait to get their hands on Tesla stock again, and analysts are on board the upgrade train.

The new Model 3, Tesla’s new “affordable luxury” sedan that’s about half the price of its signature Model S car, was unveiled less than a month ago, and Tesla recently confirmed that 400,000 units have already been pre-ordered. That’s $400 million in the bank already, since customers pay $1,000 a pop to reserve the Model 3, which won’t be ready for delivery until late 2017. And if everyone who pre-ordered a car ends up buying (they should), that will be $16.8 billion in sales for TSLA — more than the company’s total revenues in the last decade.

Tesla Stock the New Apple?

Goldman Sachs just raised its price target on TSLA shares from $202 to $245 today on optimism over Tesla’s huge pre-order count for the Model 3.

“The conclusion being that while the current payback of 9.5 years seems long, this should shorten quickly with lower battery costs and fleet driven mobility,” analyst Patrick Archambault says.

Model 3 fever has been a boon for Tesla stock, with shares up almost 12% since unveiling the vehicle on March 31. The recent run-up is merely an extension of a roughly 75% run for TSLA shares since the stock market bottomed out in mid-February.

Anticipation of the Model 3 announcement powered the February and March rally in Tesla stock, though the sharp turnaround in the broad market also had something to do with it. That led some analysts to assume that Model 3 pre-order numbers were already baked into the price of the stock.

They were wrong.

CEO Elon Musk said the demand for the vehicle has “surprised even us.” After 325,000 Model 3s were reserved in the first week, TSLA popped more than 15% — a quick return similar to the post-product-release bumps Apple Inc. (AAPL) used to get back when its iPhones still captured investors’ imaginations.

And that, above all, is the reason I would still recommend buying Tesla stock even at these elevated prices.

On Wall Street, TSLA has become the new AAPL — the hippest, most innovative company on the block, with never-before-seen products customers crave. It can generate excitement unlike just about any other tech company out there, and that’s the kind of thing that can power massive moves in momentum.

On top of that, Tesla is starting to look more fundamentally sound, with the company expected to swing to a profit for the first time this year on sales estimated to expand by 63% — that would be the company’s fastest growth since 2013.

And keep in mind that Model 3 deliveries won’t even begin for another 18 months or so.

Buy TSLA at Will

Since topping out at $265 earlier this month, Tesla stock has dipped a bit, taking up residence in the $247-to-$254 range in the past two weeks. First-quarter earnings are due out May 4, and between any updates on Model 3 pre-orders as well as Tesla getting past its Model X delays, that report could spark a breakout from this base-building range.

I’d recommend buying TSLA now, but regardless of when you get in, I think Tesla stock remains a very strong long-term buy even after the furious rally of the last three months.

Right now, the Model 3 is Reason No. 1 as to why.

As of this writing, Chris Fraley did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/04/tesla-stock-tsla-400000-model-3-love/.

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