In a new note issued this morning, Credit Suisse analyst Dan Galves reiterated an ‘outperform’ rating and $325 price target on Tesla Motors (NASDAQ: TSLA) . The analyst considers the fourth quarter guidance to be “achievable” and he sees a “reasonable path” to $4 EPS in 2016 – compared to the ~$2.30 annualized loss per share in the last quarter. Galves thinks that when it comes to Tesla, Wall Street is too focused on fourth quarter deliveries and the Model X ramp-up, but once Tesla confirms the fourth quarter deliveries in the first week of January, Wall Street’s focus should shift back to the long-term story of the company.

The mid to long-term conversation around Tesla is likely to focus on the Model 3, which is set to be unveiled in late March 2016.

In the short-term, Tesla guided between 17,000 to 19,000 deliveries during the fourth quarter. Galves sees the lower-end as achievable:

“Our estimates are based on 15k orders in Q3, 1k incremental sales in Denmark, and 1k incremental sales in UK,”

1,000 incremental sales in Denmark would be quite an achievement, but not impossible considering Tesla ordered 2,500 license plates in the country in anticipation of an important increase in sales ahead of the phasing out of tax breaks for electric vehicles in 2016. Although the effect wasn’t noticeable in the October registration data, we will be watching closely for deliveries in the last 2 months of the year as November’s statistics become available in the next 2 weeks.

The same increase in the UK would be even more extraordinary considering it would mean selling more cars in the fourth quarter than during the first 3 quarters of 2015.

Galves, like most of Wall Street, sees 2016 as Tesla’s first fully profitable year, but he is more optimistic than the consensus:

“The biggest future catalyst we see is Tesla generating significantly higher earnings and reducing the cash burn. From $2.30 annualized loss in 3Q15, we estimate 36k incremental Model X units will drive $7 of incremental EPS. This, plus better Model S margin, offset by lower-than-consensus SG&A / R&D growth means that $4 EPS (vs consensus $1.86) and a reduction in full year FCF burn to ~$500MM is achievable…although we think even hitting consensus numbers in 2016 would be a substantial catalyst.”

via StreetInsider

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