Tesla - Buy the Dip or Put on the Breaks?

Solar City Acquisition not as bad as expected

Los Angeles, February 23, 2017. - Tesla stock is down 6.04% this morning. Reason to panic and sell, or is this the buying opportunity you thought you had missed?

Barron's and several analysts may see a buying opportunity. Baird analyst Ben Kallo stayed his Outperform rating and raised his target price nearly 10% to $368 from $338.

Barron's reports:

■ Model 3 production is on schedule and we want to own ahead of and into the Model 3 launch. We believe continued execution will cause shares to trade higher, and want to own the stock as TSLA reaches milestones with suppliers and moves closer to the Model 3 launch.

■ The integration of the SCTY acquisition is not as bad as feared, and should contribute to the balance sheet in the intermediate-term. The SCTY acquisition contributed $77M of cash in the first six weeks after the acquisition closed, and management indicated it is on pace to generate $500M in cash by 2019. We believe the acquisition may be better than feared given the ongoing transition to cash/loan sales and the introduction of the solar roof in 2H:17.

■ Tesla Energy’s potential is still undervalued, in our opinion. TSLA’s energy storage business and growth opportunity is not currently reflected in TSLA’s share price, in our opinion. We believe TSLA battery sales are accelerating, and we should see additional benefits from the battery production ramp coinciding with the launch of the Model 3.

■ TSLA suits the “Made in America” theme which may benefit under the Trump Administration. We believe TSLA is well positioned for the Republican Administration given its current standing as a U.S. manufacturer and Musk’s position on Trump’s Strategy and Policy Forum.

Of the 24 analysts covering Tesla, eight have a Buy rating and the rest have Hold or Sell ratings.

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Rainer Poertner - Chief Analyst

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