News Column

Biz Break: Record high for Tesla Motors as analyst optimism abounds

August 11, 2014

By Jeremy C. Owens, San Jose Mercury News

Aug. 11--Today: Tesla stock hits a new closing high as chorus of optimistic analysts receives a new voice. Also: Intel and Apple shares rise, helping Silicon Valley tech stocks to strong gains.

The Lead: Tesla jumps to record high after analyst notes production gains

Tesla Motors stock reached yet another record Monday, as the electric car maker rode a wave of optimism to a market valuation topping $32 billion.

Tesla established a new high closing price of $259.32, topping the previous record of $254.84 set March 4, by jumping 4.5 percent in Monday's trading session. The strong increase arrived along with yet another investment bank analyst predicting the company's shares will top $300 with a new automobile offering on the way and increased production capabilities.

Deutsche Bank's Rod Lache wrote in a note Monday morning that Tesla CEO Elon Musk's recent revelations about the expected jump in automobile manufacturing at the company's Fremont factory greatly affected his views of Tesla. Musk said in last month's earnings call that Tesla would double its production capabilities from the end of this year to the end of 2015, when he expects the former NUMMI factory to produce Tesla automobiles at a rate of 100,000 cars a year.

"At this point, we see an increasingly clear path to 500,000 units of annual production by late this decade," Lache wrote. "And we don't expect growth to end there, as Tesla is already contemplating opportunities for additional production capacity."

Tesla shut down its production line last month to install new equipment meant to increase the number of cars it can make and prepare to manufacture the company's next offering, the Model X, and rebooted production last week. Tesla currently offers only an all-electric sedan, the Model S, but expects to begin sales of the SUV-like Model X next year.

Musk is also planning to reduce costs through his other main production goal, a giant battery-production facility dubbed the "Gigafactory" that he says will manufacture more lithium-ion batteries in a year than were produced globally in all of 2013.

Deutsche Bank predicted that the cost savings resulting from a successful Gigafactory "could have profound implications not only for Tesla, but for the overall auto industry," could give Tesla a cost advantage on manufacturers of gasoline-powered cars.

Last week, Tesla began its push toward record highs after optimistic notes about the Model X from Morgan Stanley analyst Adam Jonas, who reiterated a $320 price target, and Pacific Crest analysts, who established coverage with a $316 prediction.

"Some in the market have described Tesla as a 'one hit wonder' with the Model S. We expect the Model X will put that to rest very, very quickly," Jonas wrote.

Deutsche Bank became at least the fourth investment bank to predict Tesla's shares would top $300, pushing its price target from $220 to $310; Dougherty analysts have the highest price target on Wall Street for Tesla, at $325. The lowest price target according to Thomson Reuters research is $75, and JPMorgan Chase has a target of $170 on the stock.

Tesla shares have now gained 72 percent in 2014 after jumping 343 percent in 2013 on the strength of Model S sales. With its market cap finishing atop $32 billion Monday, Tesla was worth more than half as much as General Motors, at $54 billion, and nearly half as much as Ford, which ended trading with a valuation of more than $68 billion.

SV150 market report: Intel shows off Broadwell mobile chips

Tesla's record ride helped Silicon Valley technology stocks easily outpace the small gains of the larger market, with Intel and Apple throwing in some help as well.

Intel, the world's top chipmaker, jumped 1.3 percent to $33.02 while showing off its next wave of processors, designed with an eye on the mobile market that has thus far eluded the Santa Clara company. The company's next line of Broadwell chips will be smaller and use less power, helping them fit in thin tablets that do not have a fan, and arrive in devices before the holidays, Intel said Monday. Not to be outdone, rival Advanced Micro Devices showed off a new product of its own Monday: Chips designed for large servers that use technology from ARM. AMD, which has looked away from the PC market for opportunities in video game consoles and elsewhere, increased 0.5 percent to $41.14.

Apple gained 1.3 percent to $95.99 Monday, as the New York Times gave a rare peek into the Cupertino company's orientation procedures. Google dropped 0.1 percent to $577.25 while confirming its investment in an underwater high-speed Internet cable connected to Japan; Gartner predicted that the Mountain View company's Chromebooks would triple sales in the next few years. Hewlett-Packard gained 0.1 percent to $35.20 while showing off new ads using Twitter's Vine short-video app; Twitter gained 0.3 percent to $43.27 on the day. Facebook advanced 0.5 percent to $73.44 while fighting misperceptions about its Messenger app, and GoPro gained 1.5 percent $38.20 after CEO and founder Nick Woodman pumped his product in a "60 Minutes" appearance.

Up: SolarCity, Tesla, Pandora, Yelp, SunPower, Workday, LinkedIn, Electronic Arts, VMware, Symantec, GoPro, Apple, Intel, Netflix, Applied Materials, SanDisk

Down: Zynga, Nvidia, eBay, Yahoo, Google, Oracle

The SV150 index of Silicon Valley's largest tech companies: Up 11.78, or 0.77 percent, to 1,546.66

The tech-heavy Nasdaq composite index: Up 30.43, or 0.7 percent, to 4,401.33

The blue chip Dow Jones industrial average: Up 16.05, or 0.1 percent, to 16,569.98

And the widely watched Standard & Poor's 500 index: Up 5.33, or 0.28 percent, to 1,936.92

Sign up for the 60-Second Business Break newsletter at www.siliconvalley.com. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.

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(c)2014 San Jose Mercury News (San Jose, Calif.)

Visit the San Jose Mercury News (San Jose, Calif.) at www.mercurynews.com

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Source: San Jose Mercury News (CA)


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