Why Tesla Motors Inc. Shares Might Slow Down

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Deutsche Bank today downgraded electric-vehicle company Tesla Motors (NASDAQ: TSLA  ) from buy to hold, suggesting that the electric-car maker's earnings-related rally might be short-lived.

So what: Along with the downgrade, analyst Dan Galves planted a target range of $200-$220, bracketing the current price of about $210. While momentum traders might be attracted to the red-hot shares, Galves thinks that much of Tesla's growth prospects, although quite attractive, are already baked into the valuation.

Now what: According to Deutsche, Tesla's risk to reward trade-off is pretty balanced at the moment. "Production will ramp to 48k annualized by 4Q14 from 29k today (vs prior target of 40k by YE), driven by a meaningful increase in battery supply (already known) but also construction of essentially a second assembly line (Model S/X total capacity goes to ~80k)," noted Galves. "Tesla will make a significant announcement next week surrounding the 'giga-factory' that will likely drive a capital raise. We are downgrading to Hold from Buy on valuation." Given all the uncertainty continuing to surround Tesla's long-term adoption trajectory, it's tough to disagree with Deutsche's cautiousness. 

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