Barron's Wrong on Tesla $50 Target - Weekly Preview Review

Barron's: A Return Visit To Earlier Stories: Bubble Trouble
At Tesla
Aug 10 at 00:08
   

 Electric-car pioneer Tesla Motors reported a triumphal June quarter last
Wednesday, jolting the company's shares to $153 (ticker: TSLA) by week's end.
At a market value for Tesla of $18 billion, investors are looking far beyond
its current $90,000 Model S and betting that founder Elon Musk will sell
hundreds of thousands of lower-priced cars.
      "I have high confidence that we can create a compelling car for around $
35,000," said Musk in Tesla's earnings Webcast. "There is a huge amount of
work, but no miracle is required." We didn't share that confidence in our June
10 cover story ("Recharge Now!"), when Tesla stock was a mere $102. While
admiring of Musk and the award-winning Model S, we were skeptical that Tesla
could cut battery costs enough to deliver the cheaper "Gen 3" car with a
200-mile range by 2017. We even had the gall to suggest that Tesla stock might
drop toward $50 if the Gen 3 failed to deliver mass-market sales. Nothing in
its results changes that picture.

      Tesla reported a June quarter loss of $30.5 million, or 26 cents a
share, on revenue of $405 million, but that's by old-fashioned generally
accepted accounting principles. The company and its boosters encourage investors
to look past the lease-accounting that applies to a third of the 5,150 cars
delivered in the quarter, as well as the cost of stock options and "one time"
financial expenses. These adjustments yield a per-share profit of 20 cents on
revenue of $ 551 million -- and those were the numbers in most headlines.
      On the Webcast, Musk said he conservatively thinks Tesla could sell 40,000
units a year, when the car reaches Europe and Asia.
      Last week's price jump led Barclays' Brian Johnson to cool his rating to
Equal Weight, but the bullishly inclined analyst figures that sales of 70,000
annual units of the Model S, plus a crossover utility vehicle planned for late
2014, would be worth $87 on the stock today. Adding 420,000 annual units of
the Gen 3 would lift Tesla's current value to $176 a share. If that doesn't
all pan out, of course, today's stock price will vanish like yesterday's soap
bubble.

   -- July housing starts should increase to a pace of 890,000, says HFE's
O'Sullivan, after a big drop the previous month.
      -- Look for a modest rise in second-quarter productivity, O'Sullivan says.
      -- A trial over Residential Capital's settlement with Financial Guaranty
Insurance begins in bankruptcy court. Also, Eastman Kodak seeks approval to
resolve environmental liabilities.

                       Coming Earnings

 Day                    Quarter  Consensus   Year   Ticker
                                  Estimate    Ago
M
Tower Grp                 2Q       $0.53   $-0.34    TWGP
Buckeye Technologies      4Q        0.56     0.66    BKI
Bottomline Tech           4Q        0.29     0.26    EPAY
Engility                  2Q        0.79     0.93    EGL
INTELIQUENT               2Q        0.07     0.12    IQNT
Dicks Sporting Goods      2Q        0.76     0.65    DKS
Intermec                  2Q        0.00     0.02    IN
Sysco                     4Q        0.54     0.55    SYY
RTI Int'l Metals          2Q        0.16     0.17    RTI
Perry Ellis Int'l         2Q       -0.09     0.01    PERY
T
Cree                      4Q        0.38     0.25    CREE
JDS Uniphase              4Q        0.13     0.15    JDSU
Flowers Foods             2Q        0.23     0.15    FLO
Henry (Jack)  &  Assoc    4Q        0.51     0.50    JKHY
Valspar Corp              3Q        1.09     0.97    VAL
W
Macys                     2Q        0.79     0.67    M
Deere  &  Co              3Q        2.17     1.98    DE
Towers Watson  &  Co      4Q        1.27     1.25    TW
Caci Int'l                4Q        1.60     1.59    CACI
OSI Systems               4Q        1.02     0.95    OSIS
Cisco Systems             4Q        0.51     0.47    CSCO
Applied Industrial        4Q        0.76     0.75    AIT
NetApp                    1Q        0.49     0.42    NTAP
Agilent Technologies      3Q        0.62     0.79    A
Th
Perrigo                   4Q        1.56     1.28    PRGO
Kohl's                    2Q        1.05     1.00    KSS
Lauder (Estee)            4Q        0.21     0.17    EL
Bally Technologies        4Q        0.94     0.78    BYI
Wal-Mart Stores           2Q        1.25     1.18    WMT
Briggs  &  Stratton       4Q        0.19     0.22    BGG
Applied Materials         3Q        0.19     0.24    AMAT
G  &  K Services          4Q        0.65     0.59    GK
Red Robin Grmt Burgr      2Q        0.66     0.52    RRGB
Nordstrom                 2Q        0.88     0.75    JWN
F

(Earnings are diluted and report dates are tentative. All forecasts and
historical numbers exclude extraordinary items by accounting definitions.)

Source: Thomson First Call

                Consensus Estimate
Day   Time

                                                 Consesus Est  Last Period

T    8:30   July Import Prices                      0.9         -0.2%
     8:30   July Retail Sales                       0.3          0.4%
    10:00   June Business Inventories               0.1          0.1%
W    8:30   July PPI                                0.5          0.8%
Th   8:30   July CPI                                0.2          0.5%
     9:15   July Industrial Production             -0.2          0.3%
     9:15   July Capacity Utilization              77.6%        77.8%
F    8:30   July Housing Starts                   950,000      836,000
     8:30   Q2 Productivity Preliminary             1.0          0.5%
     9:55   August Michigan Sentiment              85.0         85.1