Tesla (TSLA) Climbs on New Jersey Appeal

Tickers in this article: TSLA

NEW YORK ( TheStreet) --  Tesla  closed higher on Wednesday after the electric car company appealed a rule in New Jersey which bans automakers from selling direct to the public.

By market close, shares had gained 6.1% to $230.29.

In March, the New Jersey Motor Vehicle Commission passed a rule change which would prohibit auto manufacturers from direct selling, the line of thinking being that consumers wouldn't benefit from competitive pricing and other protections offered by third-party dealers. Texas and Arizona currently have similar bans in place.

Tesla had previously been in negotiations with Governor Chris Christie's administration for the company to bypass the traditional car dealership route (that is, carmakers selling models through a third-party dealer). The company's business model had previously been under attack from the New Jersey Coalition of Automotive Retailers' (NJ CAR), according to Tesla.

In a blog post earlier in the month, the company defended its business model, writing, "This model is not just a matter of selling more cars and providing optimum consumer choice for Americans, but it is also about educating consumers about the benefits of going electric, which is central to our mission to accelerate the shift to sustainable transportation, a new paradigm in automotive technology."

The appeal follows news earlier this week that New York Governor Andrew Cuomo and state car dealership associations had come to an agreement that will allow Tesla's five existing stores in New York state to remain open.

The company-owned dealerships will be allowed to operate as normal, selling Tesla's electric car models directly to the public, so long as the company doesn't open any more, according to a report in The Wall Street Journal .

"The agreement is a win-win for consumers, for the franchised auto dealers and manufacturers who play such a vital role in New York's economy, and for cutting edge companies like Tesla," said Cuomo in a statement released by his administration.

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TheStreet Ratings team rates TESLA MOTORS INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate TESLA MOTORS INC (TSLA) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."