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Tesla Motors Inc Auto Platform Could Offer Significant Cash Flow: Analyst

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Oppenheimer’s Colin Rusch remains optimistic about the automobile arm, but is concerned about the SolarCity deal

On Tuesday afternoon, Tesla Motors Inc (NASDAQ:TSLA) announced that it has opened reservations for a new 100 kWh battery pack option for its Model S and Model X. The new top-of-the-line not only makes the Model S the world’s fastest production vehicle; it also makes it the first electric car with range of more than 300 miles.

Earlier today, Oppenheimer Maintaining Director/Auto Analyst, Colin Rusch, was present on CNBC’s “Squawk Box” and said that the important thing about the new production announcement is that Tesla is continuously evolving its product portfolio.

He explained that the automaker introduced lower-end battery pack options of 60kWh and 75kWh in past few months and now it has launched a new version ‘P100D’ for the higher-end versions. He believes that customers/owners who wanted more acceleration would be delighted about it.

“The range is a positive but speed is the thing that most folks on that high end are really concerned with,” he noted. The research firm remains “excited” regarding the company’s auto platform and expects it to provide “significant operating leverage.” Though, it maintains a Perform rating on Tesla stock as it does not positively see the combination of solar and storage.

Tesla CEO Elon Musk is purchasing more than half of the SolarCity Corp (NASDAQ:SCTY) corporate bonds worth $124 that were issued at a huge premium compared to previous security issuance, the analyst highlighted. He believes there is “some real concern” regarding Tesla and SolarCity relationship, as well as return on equity for shareholders of Tesla. Oppenheimer believes there is lack of demand for such bonds.

Though, Oppenheimer is resistant to downgrade Tesla stock to Sell, as it believes that the automaker has an “an enthusiastic investor base” and there is a possibility for a big cash inflow from the automobile business, thanks to over 373,000 reservation for the Model 3.

While Mr. Rusch believes that Tesla is strong enough to absorb SolarCity’s struggling business without jeopardizing its long-term objective; though, there is a lot to come from the deal as it is subject to shareholder vote out and regulatory approval.

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