Tesla could eventually become the next Apple or Amazon in the automobile industry, but until then, the stock is likely to remain range bound, according to AllianceBernstein analyst Toni Sacconaghi, who initiated the name with a market perform rating Thursday. "We have seen this pattern play out before (with AAPL , NFLX , AMZN ), where a single company triggers a sea change in outlook among consumers and, eventually, among traditional incumbents, who further validate the shift," Sacconaghi wrote in a research note. In the long term, he predicts Tesla is best-positioned to retain a large portion of the electric vehicle market given its leading battery technology, strong brand awareness and overall business model. "Our experience is that consumer technology disruptions occur much more quickly than is typically expected. We believe that EVs [electric vehicles] could be 40 percent of the auto market in 20 years and over 50 percent by 2050," Sacconaghi said. In the near term, however, the analyst is cautious on Tesla as the automaker fine tunes its concept and business strategy. "While we are bullish about Tesla's long-term potential, we have several near-term concerns, most notably (1) gross margins, as Model 3 and its associated capex ramps up, and (2) Tesla's overall customer experience — which we believe is not strong today — and could be further pressured as the company migrates to selling to a more mass-market consumer," Sacconaghi wrote. After rallying 344 percent in 2013, shares of Tesla have been stuck in a trading range as investors await further technology advancements that could bring down production costs and make electric cars more affordable. Tesla shares since January 2013 Source: FactSet As Tesla aims to reach a broader market through the introduction of lower-end vehicles such as the Model 3, AllianceBernstein says there's a risk of diluting the brand, should any new launches not turn out as expected. "A poor ramp and customer experience on Model 3 could not only impact Tesla's near-term financials, but undermine the franchise longer term," Sacconaghi said. At the current levels, the stock appears fully valued and it could take longer than expected for it to move out of its trading range, according to the investment firm. "Historically, the stock has moved on vehicle deliveries vs. expectations and profitability, and we believe that it is unlikely to break out of its three-year trading range until investors see evidence of profitability on the Model 3," Sacconaghi wrote. In the next 12 months, AllianceBernstein says shares of Tesla could trade at $250, or only 1 percent higher from where the stock closed Wednesday.
