Tesla Finds a Friend and a $205 Price Target in Wedbush

With Tesla’s shares back on the upswing following a favorable fourth-quarter check-in from the company at the North American International Auto Show, analysts at Wedbush Securities are again feeling more positive on the company and its chances moving ahead.

Wedbush analyst Craig Irwin reiterated his Outperform rating on Tesla’s stock, with a price target of $205. ”We hosted investor meetings with management from Tesla and came away with further confidence in our constructive thesis,” said Irwin in a note to investors. “Tesla’s [fourth quarter of 2013] deliveries upside of around 1,000 units versus our prior estimate was driven primarily by increased battery availability from Panasonic, as well as a material improvement in direct-run vehicles.”

Battery supply is a major concern for investors and analysts, not so much now but moving forward. With annual production of about 22,000 Model S sedans in 2013, Tesla’s demand for battery units never posed a significant strain on Panasonic’s ability to supply them. The real test will be in a couple of years, when Tesla’s more affordable entry-level model hits production and its lower price will blow open an entire new demographic of buyers for the company.

However, Irwin and Wedbush aren’t bothered. ”We believe the recent constraints that Panasonic’s available production capacity have presented are likely to be resolved by [the second half of 2014] when shuttered capacity is likely to be re-commissioned to produce batteries for Tesla,” he wrote. “The cost-out roadmap of a mid- to high-single-digit percent reduction in annual battery costs should support a continued tailwind for 2014 Model S gross margins.”

Before the new model arrives, though, Wedbush believes that Tesla — due to “robust demand” — will be opening up another line of production for its Model S, which costs, at base, in excess of $70,000. Coupled with the company’s plans to have the Model X crossover on roads by the end of the year, Tesla will certainly have its hands full.

Tesla’s stock responded to Wedbush’s upbeat note by taking a cooling period after running up drastically over the last couple of days.