Tesla Inc (TSLA): This Bear Reduces Model 3 Production Expectations By 75%

Cowen's Jeff Osborne believes risk of cash burn that will hit Tesla in the next years will outweigh "healthy" delivery performance from the company's older EV models.


Tesla Inc (NASDAQ:TSLA) may have a legion of bulls won over by brand legacy and potential down the line, but one bear remains unimpressed, still shaking his head at Model 3 production hiccups.

Cowen analyst Jeff Osborne has massively scaled down his Model 3 delivery expectations for the year, and even if fourth quarter deliveries will not be all that transformative to the electric car empire’s long-term picture, all the same, bulls fail to recognize the electric vehicle (EV) playing field is growing more cutthroat by the year.  Meanwhile, Tesla is burning through cash fast, having gone through what Osborne anticipates is $1.2 billion. In other words, the analyst looks for another capital raise by the first or start of the second quarter of 2018.

Once calling for 9,100 Model 3 deliveries, the analyst merely projects 2,250 Model 3 deliveries in his new, even more bearish expectations, maintaining an Underperform rating on TSLA stock with a price target of $170, which implies a 47% downside from current levels. (To watch Osborne’s track record, click here)

Overall, “[W]e still are convinced that investors aren’t fully acknowledging the competitive threat that is growing in 2018 and 2019 in the EV segment, and the cash burn that Tesla will experience in the coming years (the narrative in the last few months has shifted from cars to Class 8 trucks and recently pickup trucks). The recent bond offering is now trading below par and we believe another equity raise will be needed in the next 3 to 6 months. The narrative around high volume manufacturing of the Model 3 and hitting the 25% gross margin target will need to be amplified by management in order for investors to digest such a capital raise in our view. We also hope for more transparency on what Elon Musk’s overall vision will truly cost as we believe investors are overlooking many aspects of his total vision and myopically focused on the upcoming quarter or two,” Osborne concludes.

TipRanks pinpoints a cautious analyst consensus on Tesla’s market opportunity at play, with Wall Street torn between the bulls and the bears. Out of 23 analysts polled in the last 3 months, 5 are bullish on Tesla stock, 9 remain sidelined, while 9 are bearish on the stock. With a loss potential of just 1%, the stock’s consensus target price of $318.38 essentially aligns with where shares are currently trading.