Gushing review of Model S P85D sends Tesla Motors stock soaring

August 27 23:42 2015

Investors flocked to Tesla Motors stock on Thursday after a magazine published a gushing review about a luxury electric vehicle that’s not expected to sell in high quantities. Tesla shares had soared 7% by 11:51 a.m. to $240.19 after Consumer Reports said the company’s new Model S P85D electric sedan earned a perfect score on a 100-point scale. In fact, the magazine said the $127,820 car shattered its ratings system, somehow earning a score of 103 points on the old scale.

But since the scoring system “by definition doesn’t go past 100,” the magazine “had to make changes to its scoring methodology to account for the car’s exceptionally strong performance,” reviewers said in a statement. Still, that doesn’t explain the stock increase. Reviews of the company’s base-line Model S have been outstanding from the beginning. There’s little reason to question the design, quality or performance of the Model S, and owner satisfaction is high.

There may be other factors at play in driving up Tesla shares. Morgan Stanley analyst Adam Jonas last week raised his target price of Tesla shares to $465, believing that the company is poised to capitalize on a move toward an increasingly pervasive culture of car-sharing. What matters more to the company’s financial performance is September’s highly anticipated release of the Model X crossover, the company’s spending on a new battery factory and engineers’ ability to reduce battery costs.

Tesla recently lowered its production outlook for 2015 to 50,000 to 55,000 vehicles for the full year. Without mass appeal of the company’s vehicles, Tesla’s sky-high stock valuation looks inflated. Tesla’s second-quarter 2015 net loss was $184.2 million, about triple its loss of $61.9 million from the same period a year earlier. The second-quarter loss was partially attributable to heavy spending on R&D and investments in a new battery factory in Nevada that will supply home-energy storage systems and future electric vehicles.