Key Analyst Sees Nearly 25% Upside in Tesla

The brokerage firm expects 11,000 to 11,500 in deliveries in the second quarter, versus the guidance of 10,000 to 11,000. This is including the expectation that April and May’s volumes in North America and European will be nearly double January and February’s levels.

Ultimately, Credit Suisse believes that overall guidance for 55,000 units in 2015 includes about 48,000 for the Model S. To achieve this level of sales, it would represent 52% growth in the third full year of Model S sales. At the same time, this would undercut the most prevalent short thesis, and it would increase confidence for 100,000 to 150,000 sales over next couple years. The firm expects that the uptick of 13,500 per quarter in the second half of 2015 will be driven by the lower-end Model S70D, which only began reaching U.S. customers in mid-May and Europe in late June.

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Assuming $400 million drawdown of this low-cost, covenant-light credit line, Credit Suisse expects Tesla to end 2015 with about $1.5 billion of cash, well above the $1.0 billion comfort level. While the firm still thinks external funding over the next 12 months is likely, it believes strong access to credit markets makes straight debt financing more likely.

Tesla detailed in the report:

We see substantially more upside for the stock: We maintain fiscal 2015 and 2016 estimates of $0.12 and $4.00, introduce fiscal 2017 estimate of $6.00, and raise target price to $325 from $290. Overall, we see a much cheaper stock today vs the all-time high of $282 in Sept ’14, as near-term risks surrounding the auto business have been substantially reduced. Incrementally, Tesla Energy has potential to add 15%-35% to late-decade auto revenues which we believe makes valuations as high as ~$400 possible over the next 12-18 months.

So far on the year, Tesla shares have had a strong performance, as year to date they are up 20%.

Shares of Tesla were down 1% to $264.33 just after Monday’s opening bell. The stock has a consensus analyst price target of $274.94 and a 52-week trading range of $181.40 to $291.42.

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