Coverage Initiated: Tesla Motors (TSLA)

After Tesla's stock exploded in May, 2013 there has been large speculation on the company's lofty valuation. Tesla's revenue grew 50% in FY 14 from it's largely popular Model S. We expect this growth not only to continue, but accelerate. Last year, Tesla sold roughly 32,000 Model S's this year they expect to sell about 55,000 (We expect 65,000). Tesla's growth has been production constrained ever since the Model S went into production. To meet demand, Tesla has built out their factory to handle more than 2000/week production by year end (currently 1000/week). 

We expect Tesla to be producing over 500,000/year by 2020 if not sooner. If Tesla's expansions into the mass market segment go well in 2017 we could see the growth accelerate faster. Details on Tesla's growth potential can be found in our report from last month "Tesla's road to 700 Billion Market Capitalization". 

Tesla's battery technology allows the company to produce large capacity battery packs at lower than market costs. This competitive advantage puts Tesla 4-5 years ahead of competitors. We expect that competitive advantage to continually get larger as Tesla invests heavily into battery technology and manufacturing methods. 

We are initiating coverage at Outperform and a target of $300 per share.