The Zacks Analyst Blog Highlights: Tesla Motors, Ford Motor, China Automotive Systems, Costco Wholesale and Target

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Jul 17, 2014, 09:30 ET

CHICAGO, July 17, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Tesla Motors, Inc. (Nasdaq:TSLA-Free Report), Ford Motor Co. (NYSE:F-Free Report), China Automotive Systems Inc. (Nasdaq:CAAS-Free Report), Costco Wholesale Corporation (Nasdaq:COST-Free Report) and Target Corporation (NYSE:TGT-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Wednesday's Analyst Blog:

Tesla Names Affordably-Priced Car Model 3, Plans 2016 Launch

Tesla Motors, Inc. (Nasdaq:TSLA-Free Report) recently christened its much-hyped affordably-priced third generation vehicle Model 3. The automaker plans to showcase the car in 2016 and will initiate its commercial launch in 2017.

Priced at $35,000, Model 3 will be Tesla's third generation car after the original Roadster and Model S. Designed to be about 20% smaller than Model S, Model 3 will have a range of approximately 200 miles per charge. Also, the vehicle will be equipped with the batteries manufactured in Tesla's planned Gigafactory. These batteries will be compatible with Tesla's Supercharger stations across the globe.

This electric car will be modeled on a new platform instead of being a modified version of Model S and Model X. Notably, the Vice President of vehicle engineering at Tesla, Chris Porritt, also a former chief engineer of Aston Martin – the British manufacturer of luxury sports cars – will be designing Model 3. Leveraging on a unique design and the environment-friendly angle, the vehicle is likely to provide stiff competition to the BMW 3 Series.

Previously, Tesla had planned to name the new vehicle Model E. However, Ford Motor Co. (NYSE:F-Free Report) owns the trademark to that name. Thus, if Tesla named its third-generation offering Model E, Ford might have leveled legal charges against Tesla.

Tesla enjoys a competitive edge over its peers owing to its stylish and high-performing products. The automaker has garnered a loyal customer base through the launch of Roadster and Model S, both of which offer impressive range and speed. Tesla is also aggressively working toward expanding its product portfolio to boost sales. The company's Model X will hit the market early next year.

Recently, the Chinese government enforced a law which specifies that 30% of the government vehicle purchases should comprise electric vehicles. This should bolster Tesla's sales in the nation, which is the world's largest automobile market. However, Tesla will face competition from domestic Chinese electric car manufacturers like Kandi Technolgies Group for sales.

Tesla currently carries a Zacks Rank #3 (Hold). China Automotive Systems Inc. (Nasdaq:CAAS-Free Report) with a Zacks Rank #1 (Strong Buy) is a better-ranked automobile stock worth considering.

Costco Dominates Warehouse Retail on Decent Comps

Costco Wholesale Corporation (Nasdaq:COST-Free Report) looks unfazed by the soft recovery in the U.S. economy. The company has managed to keep an upbeat note and sustain its sales momentum amid heightened competition to grab a bigger share of the market.

Costco continues to be a dominant retail wholesaler, based on the breadth and quality of the merchandise it offers. The company's strategy to sell products at heavily discounted prices has helped it to remain on a growth track, as cash-strapped customers continue to see it as a viable option for low-cost necessities.

Riding on Positive Comps

Costco is well positioned in the warehouse club industry, having delivered positive comparable-store sales consistently so far in 2014.

Costco, which faces stiff competition from Target Corporation (NYSE:TGT-Free Report) and Sam's Club, has consistently registered comparable-store sales growth from January to June. Within this period, comps growth touched a low of 2% and hit a high of 6%, thereby recording an average growth of approximately 4.7%. In the first six months of 2014, comps increased 4% in January, 2% in February, 5% in March and April, and 6% in May and June each.

Given the current macroeconomic environment, monthly sales data for Costco is also encouraging, reflecting consistent growth. The company, within the span of January to June, registered sales growth in the range of 4%–10%, reflecting average growth of approximately 7.2%. The company registered sales growth of 6% in January, 4% in February, 8% in March, 7% in April, 8% in May and 10% in June.

Growth Drivers

A differentiated product range enables Costco to provide an upscale shopping experience to its members, resulting in market share gains and higher sales per square foot. Moreover, the company continues to maintain a healthy membership renewal rate. Costco also remains committed to open new clubs in domestic and international markets. The company's diversification strategy is a natural hedge against risks that may arise in specific markets.

Costco's Zacks Rank

Costco currently carries a Zacks Rank #3 (Hold).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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