Credit Suisse: The Tesla shorts are all wrong

Credit Suisse automotive-analyst Dan Galves is known for his bullish stance on Tesla.

In a note published Monday, he upped his target price to $US325 from $US290 and reiterated an outperform rating on the stock. That’s roughly 20% higher than where the stock is currently trading.

He also challenged the short thesis some less optimistic investors have adopted.

Galves thinks Tesla will be able to deliver a projected 55,000 cars this year — a 52% growth in sales. He didn’t pull that number out of the air; it’s what Tesla CEO Elon Musk has projected.

“We believe that hitting the 2015 guidance could reduce short interest substantially and would increase the Street’s confidence that Model S/X combined volumes will reach 100k-150k units annually in the next couple years,” Galves wrote.

“In turn, this should increase confidence in the 500k volume target for 2020.”

According to Galves, a full 25% of Tesla’s stock float is comprised of short interest. These traders believe the company’s 2015 sales volume will “miss substantially” on the 55,000 vehicles promised. Tesla did miss on deliveries in 2014, but not by much. And the cars that it didn’t get into customer hands in late 2014 were delivered in the first month of 2015.

Galves pointed out that the imminent arrival of the Model X SUV and ongoing Model S sales growth in 2015 will help mitigate risks surrounding Tesla’s automotive operations.

Furthermore, Credit Suisse projects that Tesla’s energy business, based on its home and utility scale batteries, could add as much as 15%-35% to its stock value and could push the price as high as $US400, well above its all-time trading high of $US291, reached in September of last year.

Tesla is trading higher on Tuesday, at $US268.

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