Analysts tell investors to pick up Tesla shares

AP News
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Posted: Jan 17, 2012 12:30 PM
Analysts tell investors to pick up Tesla shares

Shares of Tesla Motors Inc. got a boost Tuesday after a pair of analysts raised their ratings for shares of the electric car maker to "Buy," saying their plunge in price on Friday makes them an attractive investment.

THE SPARK: Goldman Sachs and Wunderlich Securities both said that the recent departures of two of Tesla's top engineers weren't significant enough to justify a nearly 20 percent drop in the company's share price after the announcement.

THE BIG PICTURE: Peter Rawlinson, Tesla's vice president and chief engineer, and Nick Sampson, who supervised vehicle and chassis engineering, left the company earlier this month.

The news, first reported by Bloomberg, sent the Palo Alto, Calif.-based company's shares down more than $5 Friday to close at $22.79. The markets were closed Monday for Martin Luther King Jr. Day.

THE ANALYSIS: Analyst Patrick Archambault of Goldman Sachs said that, while Rawlinson's departure is unfortunate, the company has enough time to adjust because its Model S has moved to the manufacturing stage and its Model X isn't slated for production for another 18 months or so.

"While Tesla's business model is far from risk-free, we believe the company's unique power-train technology, strong breadth of expertise and liquidity make for a favorable risk-versus-reward," Archambault wrote in a note to investors.

And Wunderlich's Theodore O'Neill said Friday's stock drop wasn't warranted, though he maintains some reservations about the company.

"There are a lot of ways the launch of the Model S could go wrong: supplier issues, manufacturing glitches, a host of unknowns, but we wouldn't count the news on Friday as one of those items," O'Neill wrote in his note. "The Model S appears to be much further along than anything that the loss of these executives could impact."

THE SHARES: By midday Tuesday, Tesla shares were up $4.28, or 19 percent, trading at $27.07, and had traded as high as $27.33, erasing most of Friday's drop. Over the past 52 weeks, they have traded between $21.11 and $32.49.