Today: Tesla's Model S named Consumer Reports' top pick as plans for battery factory and autonomous driving lead to boosted projections, skyrocketing stock price. Also: Hedge fund increases its bid for Riverbed Technology, LinkedIn gains amid China effort.
The Lead: Tesla stock leaps after Consumer Reports award, analyst note
Tesla's jaw-dropping run on Wall Street shifted into a new gear Tuesday, as shares jumped as much as 19 percent from record highs after Consumer Reports named the company's Model S its top pick for 2014 and an analyst doubled his projections for the electric car maker on hopes for its battery factory and autonomous driving efforts.
After establishing intraday and closing record prices Monday, Tesla shares jumped as high as $259.20 in Tuesday trading before closing with a gain of $30.30, or 13.9 percent, at $247.95. The Palo Alto company has now seen its valuation rise by 64.8 percent in 2014 after skyrocketing 353 percent last year, propelling its market capitalization higher than $30 billion for the first time.
Consumer Reports has praised the Model S before, giving it the highest score on record in its initial test, 99 out of 100, and finding that owners of the first electric car fully designed and manufactured by Tesla were the most satisfied in a subscriber survey. Tuesday's award may have been the most important yet, however, as Will Oremus of Slate points out: It is the first car since 2010 to be awarded the selection of top overall pick and gives the Model S the magazine's coveted red check designation as a recommended purchase.
"The Tesla is brimming with innovation," Consumer Reports enthused, calling the Model S a "technological tour de force."
Tesla plans to follow the Model S with an SUV-style electric automobile called the Model X and a less-expensive sedan currently called the Gen 3 or Model E, but those future developments aren't what got Morgan Stanley analyst Adam Jonas jazzed. Jonas more than doubled his price target on Tesla, from $153 to $320, after investigating the company's plans to build its own batteries and offer autonomous driving in the future.
"Tesla may achieve pole position for the two most transformational developments in the auto industry over the next 5, 10, and 20 years: electrification and autonomous vehicle technology," Jonas wrote.
In Jonas's estimation, Tesla could disrupt the electricity supply industry by mass-producing its lithium-ion batteries and selling them, such as its deal to do exactly that with SolarCity, the San Mateo solar installer for which Tesla CEO Elon Musk serves as chairman and principal investor. SolarCity also jumped to record intraday and closing prices Tuesday, gaining 3.4 percent to $81.18.
"Tesla's quest to disrupt a trillion-dollar car industry offers an adjacent opportunity to disrupt a trillion-dollar electric utility industry," he wrote. "If it can be a leader in commercializing battery packs, investors may never look at Tesla the same way again."
The analyst also believes that Tesla will be able to popularize autonomous car software, an effort long under development at Google that Musk said last year his company will attempt in a different way.
"As the role of software engulfs the car, the world's only Silicon Valley-based car company has the upper hand," Jonas wrote. "We see autonomous cars contributing $5.6 trillion in economic savings globally."
Jonas acknowledges that his projections are based on a long timeline, running through 2028, and that prices will seem elevated in the near future. That issue is causing Tesla bears to fret even more, with one investor telling the Wall Street Journal on Tuesday, "It is ridiculously overpriced and is the poster child of a bubble in my opinion."
Even those who have bet on Tesla are concerned that the price is getting too high too fast, with one investor who has held Tesla stock for a year and a half calling the current price "uncomfortably expensive."
"You never have any comfort holding something like this. We are holding on, but fully expect it could pull back," Robert Lutts, chief investment officer for Cabot Money Management, told the Journal.
SV150 market report: Riverbed gains after hedge fund increases bid
Wall Street indexes suffered slight dips on Tuesday, including the SV150, as smaller companies prospered while the bigger names, which weigh more on indexes, suffered.
Riverbed Technology popped 4.1 percent higher to $20.66 after Elliott Management increased its bid for the San Francisco networking company from $19 a share to $21. The New York hedge fund has been pressuring Riverbed to sell in what one analyst has described as "a high-stakes game of poker" -- by setting a floor for what it thinks an acquisition could cost, it invites other companies to come in and bid more, hoping for an offered price that Riverbed's board cannot refuse. "Other potential buyers have expressed their acquisition interest directly to Riverbed and its adviser, Goldman Sachs," portfolio manager Jesse Cohn wrote in Elliott's letter to Riverbed. "These parties appear to be willing to offer materially more for the company than we are. However, despite Riverbed's statement that it would carefully review any credible offer, it is our understanding that Riverbed's board has thus far completely ignored these overtures." FBR Capital Markets analyst Daniel Ives, who made the poker reference to the Elliott-Riverbed dance, said in an updated note Tuesday that Riverbed may receive bids of $24 to $25 a share.
LinkedIn gained in an up-and-down day for Silicon Valley social-networking stocks, adding 5.1 percent to $209.84 after announcing a new Chinese-language website that will comply with censorship demands. Sector leader Facebook fell 1.3 percent to $69.85 while reportedly discussing illegal gun sales, while former close partner Zynga hit a new 52-week high and gained 1.6 percent to $5.08 after a lawsuit stemming from its initial public offering was dismissed. Twitter fell 1.5 percent to $54.96 while adding advertisements to search results, and Yelp barely moved, gaining 3 cents to $94.70.
Apple slipped 1 percent to $522.06 while continuing to face security problems in its mobile operating system and voicing opposition to a bill in Arizona that would legalize discrimination. Google established new record highs and gained 0.6 percent to $1,220 while dealing with questions about its financial disclosures and a variety of issues surrounding Google Glass. Silicon Valley's next round of IPOs moved closer to Wall Street, as Mountain View website Coupons.com updated its SEC filing with a goal of selling at least 10 million shares at a cost of $12 to $14 a share, and South San Francisco biotech Achaogen established the same price range.
Up: Tesla, LinkedIn, SolarCity, Splunk, Zynga, Pandora, Netflix, Google, Electronic Arts, Gilead, Oracle
Down: Juniper, Workday, Twitter, Facebook, Cisco, Adobe, Apple, NetApp, AMD, SunPower, VMware, Nvidia, Yahoo, Salesforce
The SV150 index of Silicon Valley's largest tech companies: Down 3.84, or 0.24 percent, to 1,562.49
The tech-heavy Nasdaq composite index: Down 5.38, or 0.13 percent, to 4,287.59
The blue chip Dow Jones industrial average: Down 27.48, or 0.17 percent, to 16,179.66
And the widely watched Standard & Poor's 500 index: Down 2.49, or 0.13 percent, to 1,845.12
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.