Cheer up Iron Man: Tesla top 2015 Wall Street pick

Tesla top 2015 Wall Street pick
Tesla top 2015 Wall Street pick

Elon Musk has lost more than $1 billion on his Tesla holdings alone in the last month. But the inspiration for Hollywood's "Iron Man" may be a lot happier next year, if Wall Street analysts are right.

Tesla shares are due for a 30 percent comeback in the next 12 months based on the average analyst price target of $269.25 compiled by FactSet. Only Wynn Resorts shares are due for a bigger rally among stocks in the Nasdaq 100 index, according to FactSet.

Tesla shares should top Google, Netflix, Apple and Priceline in 2015, according to the data.

As the price of oil has collapsed since November, so have shares of Tesla as investors bet gas guzzlers will be back in style with lower gasoline prices. However, analysts are sticking by their bullish price targets for Tesla, seeing the electric car company as a high-end technology story and not an alternative energy story.

Five analysts have reiterated their price targets for Tesla this month, among them Pacific Crest's Brad Erickson on Thursday, who sees a 48 percent rally in the shares to $316 over the next 12 months.

"While TSLA is a momentum stock, investors have been baking in that lower oil prices will be certain to reduce demand for electric vehicles, regardless of pricing," Erickson wrote in the report. "The market is being predictably irrational, and this has created a much better entry point in TSLA."

Tesla shares actually topped $290 in September before oil's drop turned into a crash, so analysts believe they can certainly get there again as the price of oil stabilizes in 2015.

"The way I look at Tesla in my bullish view stems from the disruptive nature of their technology," Carter Driscoll of MLV, a New York-based investment bank, said in a phone interview. Driscoll still sees Tesla rising to $300 over the next 12 months, according to FactSet.

Since oil's slide accelerated a month ago, Tesla has been the second-worst performer in the tech-heavy Nasdaq 100 index, falling 17 percent, according to Kensho, a quantitative tool used by hedge funds (Wynn Resorts was the worst performer).

Tesla has never had a relationship with oil before this past month. With "1" equaling a mirror image with oil and "0" equaling no discernible trend whatsoever, Tesla shares have a 0.12 correlation with crude over the past two years, according to Kensho.

Musk owns 28.3 million shares of the company he co-founded, according to filings, giving his stake a value of about $6 billion based on Thursday's stock price. A month ago, his stake was worth more than $7.2 billion. "Iron Man" director Jon Favreau told Time magazine four years ago that Musk was the inspiration for the lead character in the film because of his creation of Tesla as well as solar company SolarCity and space explorer SpaceX.

"The stock has a very strong retail (trading) base so it can be volatile on a day-to-day basis," Driscoll said. "I don't think anything has changed. It's just become more attractive on a valuation basis."

Pacific Crest said valuation is "much more reasonable given growth" and, discounting risks, has reiterated its "outperform" rating and $316 price target on the stock.

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The note added that Tesla is growing more than 12 times faster than its peer group, which includes Amazon and Apple, but is only trading with an enterprise value of 2.6 times its 2016 revenue.

Pacific Crest believes revenue of $11 billion to $12 billion in 2016 is well within Tesla's reach.

The stock trades at nine times sales, near its lowest valuation on that basis over the past five years, according to FactSet.

Along with the drop in oil, a delay in the introduction of its new Model X vehicle made for a perfect storm of negative news for the stock in the last month. Musk announced the delay with the company's third-quarter earnings report last month. But the Model X is still coming and it will still turn heads in 2015 like Apple and GoPro do with their new product releases, the Pacific Crest analyst wrote in his note.

These stocks (Apple, GoPro) hit highs every time a new product was announced, and Pacific Crest expects the Model X to launch sometime in the third quarter of 2015, giving ample time for Tesla stock to rise into that release.

Don't wait too long, the report said. "Tesla will sell everything it makes, for a very long time."

Stifel Nicolaus, which has the highest price target on Wall Street at $400, said pushing the Model X introduction out to 2015 was "most prudent" on Musk's part as there's no rush with no real pure electric luxury carmakers out there.

And analysts have played down concerns over competition from major carmakers' alternative energy plans.

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"That's great that (competitors) finally embrace electric vehicles," MLV's Driscoll said. He noted that anyone from BMW to Toyota getting into electric vehicles would increase availability of refueling stations and actually help Tesla's sales.

Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.