Stifel analysts James J. Albertine and Lucy Webster examine Tesla’s prospects, and come away with the idea that, far from its meteoric rise petering out, 2014 will be another year of growth for the industry darling electric car company.



Tesla views 2014 as another growth year

Most notably this week (a) Tesla Motors Inc (NASDAQ:TSLA) management announced 6,900 units delivered in 4Q13 vs. expectations for 6,000, (b) Tesla Motors Inc (NASDAQ:TSLA) publicly dismissed National Highway Traffic & Administration (NHTSA) implications that recent remote updates are akin to vehicle recalls, and (c) management provided a more in-depth update on its 2014 outlook at a recent investor conference in Detroit. Looking ahead, we believe Tesla Motors Inc (NASDAQ:TSLA) views 2014 as another “growth year” driven by vehicle sales, retail/charging locations. We also believe Tesla Motors Inc (NASDAQ:TSLA) is seeking to dial-back ’14 expectations for Model X, with production slated to begin in late 3Q/early 4Q14 and sales in early ’15. Given these updates, we are taking this opportunity to refresh our modeled estimates.

News: On Tues., 1/14, Vice President Jerome Guillen announced at the Detroit Auto Show that Model S sales reached 6,900 in 4Q13 vs. prior guidance for 6,000. Looking ahead, Mr. Guillen reiterated Tesla Motors Inc (NASDAQ:TSLA)’s view that 2014 will be another year of significant growth as sales and service locations are expected to double y/y in North America, and noted its supercharger network build-out is ahead of schedule. Mr. Guillen also provided commentary related to power adapter updates for vehicles and home charging devices – in response to a recent southern CA garage fire. Tesla Motors Inc (NASDAQ:TSLA) is in the process of rolling out a remote software update to 29k Model S units in operation and will be mailing new home charging units directly to customers free of charge.

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Tesla model update:

We are lowering our FY13 non-GAAP EPS estimate to $0.62 from $0.73 (Street: $0.59) to reflect in the increase in units vs. our prior estimates and our expectation for lower gross margin. We are modeling a 14.1% automotive gross margin excluding all regulatory credit revenue (implying a 16.6% automotive gross margin ex-ZEV credits).

We are lowering our FY14 non-GAAP EPS estimate to $1.60 from $1.67 (Street: $1.54) to reflect increased costs associated with a more rapid build-out of North American superchargers and service stations. We continue to model +93% y/y growth in Model S unit sales and forecast no Model X unit sales in 2014. We are modeling a 23.8% automotive gross margin excluding all regulatory credit revenue (implying a 25.2% automotive gross margin ex-ZEV credits).

We are raising our FY15 non-GAAP EPS estimate to $2.48 from $2.43 (Street: $2.90) to reflect increased unit sales and ramping Model X adoption. We model +25% y/y growth in Model S unit sales and forecast Model X unit sales of 31,500 units. We are modeling a 22.5% automotive gross margin excluding all regulatory credit revenue (implying a 23.6% automotive gross margin ex-ZEV credits).