Electric Cars Are About to Get Charged Up
Jun 14th 2012 12:22PM
Updated Jun 14th 2012 12:56PM
Just when you thought that electric cars were running low on juice, along comes Wall Street with its foot on the accelerator.
Lazard Capital initiated coverage of Tesla Motors (NAS: TSLA) this morning with a buy rating. Analyst Sanjay Shrestha is establishing a price target of $42 on the stock. That may seem conservative in light of Maxim Group initiating a $50 price target last month, but even $42 represents a better than 40% return off yesterday's close.
Barclays Capital and Goldman Sachs have also reiterated their bullish positions in recent weeks.
Why is everyone rallying behind the American maker of all-electric vehicles?
It's certainly not gas prices bringing Wall Street around. Prices at the pump have been falling in recent months, surprising the pros that figured fuel prices would head higher into the seasonally potent summer travel season.
It's also not the fundamentals behind the industry itself.
General Motors (NYS: GM) has had to temporarily halt production of Chevy Volt vehicles at least twice in recent months in light of soft sales for the plug-in electric, which is backed by a small gas tank for greater range. Stories earlier this year -- including advanced lithium ion battery maker A123 (NAS: AONE) staging a recall and reports of some Tesla Roadster batteries failing -- also spooked potential buyers.
If lower gasoline prices make electric cars less attractive due to longer time frames to recoup the fuel savings by going electric, then why are analysts scrambling to be on the bullish side of Tesla? Well, the "S" marks the spot.
Deliveries of Tesla's Model S -- originally set to hit the market in July -- will begin a week from Friday. The initial production run was sold out long before gas prices began heading lower, but the very presence of the car out on the open road will turn heads and attract interest. Tesla's original Roadster was a sporty indulgence, but the six-figure price tag kept most buyers away. The Model S starts at a more reasonable $49,900.
The electric car industry will be validated throughout the year as other carmakers roll out their plug-in models, but next week is when Tesla will once again be turning heads. You can't blame analysts for making their bullish opinions known before it becomes fashionably obvious.
Hit the road
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At the time this article was published Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.The Motley Fool owns shares of Tesla Motors. Motley Fool newsletter services have recommended buying shares of Tesla Motors and General Motors. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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