Argus Upgrades Tesla To Buy, Sees 2017 Revenue Up 31% From 2016

Argus’ Bill Selesky upgraded the rating on Tesla Motors Inc (NASDAQ: TSLA) from Hold to Buy, with a price target of $333.

Poised For Growth

“Although Tesla has faced production shortfalls and cost overruns over the past 18 months, we believe that the company has made progress in addressing these issues and that it is poised for much stronger performance in the coming quarters,” Selesky explained.

The company has completed the construction of its Gigafactory, a battery production plant in Nevada. Management believes that this would reduce Tesla Motors’ battery pack costs by over 30 percent.

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Selesky believes that reduced battery costs would help the company to price its third generation vehicles at approximately $35,000, meaningfully lower than the price of its current models.

Revenue Upside

Going forward, the analyst expects the company to meet or beat its production targets, while achieving positive cash flow in 1Q16. Non-GAAP earnings are also expected to significantly accelerate in 2017.

Selesky now expects Tesla Motors to generate revenue of $11.18 billion for 2016, up 31 percent from the previous estimate, driven by “improved production efficiency, modest increases in both gross and operating margins, and continued global economic growth.”

The non-GAAP EPS estimate for 2016 has been lowered from $1.48 to $1.25 to reflect higher cost expectations, with the company continuing to invest in new projects.

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