If you followed the recent presidential
debates, you may have heard presidential candidate, Mitt Romney, attack
the luxury electric car maker,
Tesla Motors (NASDAQ: TSLA), calling the company a "loser."
On
the heels of President Obama's re-election, the comment seems ironic.
Not only did Tesla recently report upbeat third-quarter results, but its
flagship Model S luxury sports sedan just won a prestigious industry
award. It was named "Automobile of the Year" by Automobile Magazine.
With
President Obama's clean energy policy plans, the electric vehicle
company should continue to shine. Obama wants to see at least 1 million
hybrid and electric vehicles on the road by 2015. And Tesla is working
hard to help make this goal a reality.
The car company is currently producing
more than 200 cars a week, or more than 10,000 cars a year. According to
management, this production level is the critical threshold needed to
generate positive operating
cash flow.
Resolving important production issues, the company now plans to further
ramp up production to 400 cars per week by December 2013.
In
addition, Tesla plans to install "fast-charging stations" on all major
routes throughout the United States by the end of 2013. These
solar-powered stations will recharge Tesla vehicles, enabling them to
run for about 250 miles per charge. According to Tesla's
CEO
Elon Musk, these charging stations will be a major breakthrough in
electric vehicle technology, and it will take about as long to recharge
the car as it would to stop for gasoline and a bathroom break in
gas-powered vehicle.
With all these positives, the so-called "loser" looks quite appealing.
Although
shares have been on a
major downtrend
since March 2012 -- falling about 33% from their late March high of
$39.95 to a mid-October low of $26.86 -- the stock appears to be on the
verge of a major technical reversal.
Upon
hitting support at the $26.86 level, shares have been moving up. At
$31.38 at the time of this writing, the stock appears ready to test the
major downtrend line. If Tesla can bullishly break resistance, marked by
the downtrend line, the stock could pop, and shares would likely surge
up to the next significant resistance level. No significant resistance
occurs until around $36.42, a high in late 2010.
The
bullish
technical outlook is supported by an upbeat fundamental outlook. Due to
increased deliveries of the company's flagship Model S sedan,
management projects full-year 2012 revenue will be in the range of $400
million to $440 million, a gain of at least 95% from last year.
With
increasing demand for energy-efficient vehicles, analysts' project
first-quarter 2013 revenue will jump a whopping 1,100% to $30 million,
from $362 million in the comparable year-ago period.
Although the
earnings outlook is not as optimistic, analysts do expect a positive outcome in the coming quarters.
For
full-year 2012, analysts' project earnings will fall to -$3.07 per
share, from -$2.21 per share last year. However, as the company carries
out its plans to increase manufacturing efficiencies and cut costs,
analysts expect the earnings story to dramatically turn around. Earnings
are expected to go from -$0.76 per share in the first quarter of 2012
to -$0.16 per share in the first quarter of 2013. And full-year 2013
earnings are estimated to come in at +$0.16.
Risks to consider:
While electric vehicles are making in-roads with energy-conscious
consumers, Tesla is not yet a well-known car company. In order to win
over more drivers, Tesla will need to establish greater brand awareness,
beating out better-known competitors like Ford (NYSE:
F) and Toyota (NYSE:
TM) -- both of which
offer
hybrid vehicles. Tesla is a relatively new company (founded in 2003),
and as its cars continue to earn prestigious accolades, greater consumer
brand awareness should follow, boosting future sales.
Recommended Trade Setup:
-- Buy TSLA at $31.38 or below
-- Set stop-loss at $26.82, slightly below current resistance
-- Set initial
price target at $36.42 for a potential 16% gain by mid-2013
Click Here to Listen to the Audio
