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Tesla (TSLA) Weakness on Oil Prices Provides Buying Opportunity - Baird

December 8, 2014 6:15 AM EST
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Price: $175.79 -2.25%

Rating Summary:
    23 Buy, 27 Hold, 13 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 0 | Down: 0 | New: 0
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Baird analyst Ben Kallo reiterated an Outperform rating and $275 price target on Tesla Motors (NASDAQ: TSLA) saying recent weakness related to the oil price decline provides a buying opportunity.

Kallo commented, "We believe the recent decline in TSLA shares is largely driven by the concern low gasoline prices could impact demand if sustained for the long term. That said, we think the weakness provides a buying opportunity as we believe TSLA will continue to see strong demand which is largely driven by performance, quality, and brand. We would be buyers of the stock at current levels."

Kallo said low gasoline prices could impact Model 3 demand, although TSLA has significant time for vehicle development and oil prices should continue to fluctuate. "We expect Model 3 volumes to reach 300-350k by 2020 as TSLA ramps production and we think TSLA has sufficient time to improve its battery technology and range, and to reduce costs," he said. "Given the potential fluctuations in gasoline prices, we believe consumers will still be attracted to the Model 3, which should have adequate range (200+ miles) and a competitive price."

The analyst also notes Tesla vehicles are purchased for performance, quality, and brand, which are minimally affected by oil prices. In addition, vehicles still provide significant gasoline savings with low oil prices. "Based on the current national average for gasoline prices of $2.78/gallon according to the EIA, Model S owners save ~$1,371 annually on fuels costs (assuming 15,000 miles driven in a vehicle averaging 22 mpg and electricity price of $0.12/kWh)," he notes.

For an analyst ratings summary and ratings history on Tesla Motors click here. For more ratings news on Tesla Motors click here.

Shares of Tesla Motors closed at $223.71 yesterday.



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Robert W Baird, Tesla, Ben Kallo