Oppenheimer analyst Colin Rusch believes Tesla (TSLA) shares are “poised to break higher” as we go out of 2018 and into the new year. After a year full of headlines and stories including a settlement with SEC and a new board chair, the analyst says he believes TSLA is enjoying improved fundamentals based on increasingly efficient manufacturing, strong ASPs leading to better cash flow and slow/disappointing competition entering the market for EV/PHEVs.
To reflect his growing optimism about the company, Rusch reiterates an Outperform rating for the stock with a price target of $418, showing a 26% potential upside. (To watch Rusch’s track record, click here)
Rusch highlights a few key factors that boost his confidence in his bullish thesis:
- Model 3 ASPs seem to be holding up better than investors anticipated. The analyst sees the possibility for about $900 million in cash OP and about $1 billion in FCF during the fourth quarter of 2018.
- Deliveries are on par. Reports showing TSLA has reached production numbers of 7k Model 3s per week, which was the company’s goal. The analyst suggests the declining level of rework for vehicles leads him to expect Model 3 GM to move higher, possibly into the low twenty percents.
- Competition. Tesla is outselling its competition in both the traditional luxury car market as well as in the electric car market. The analyst recognizes there’s a threat of new e-car companies, but ultimately, he believes TSLA will continue to be the leader in the market.
- Additionally, the analyst notes a milestone for the company — which came in late November when the number of miles driven in autopilot hit 1 billion. Also, as each software update becomes available, researchers can get a better idea of the car’s capability. The analyst predicts the clouds will clear for the company.
“We believe as TSLA delivers steady cash flow, a new group of investors will begin taking positions, helping drive shares higher. We are looking to solid Model 3 deliveries and GM plus announcement of China factory financing as catalysts into early 2019,” the analyst concludes.
While Rusch sees upside in TSLA stock, not all analysts are going along for the ride. TipRanks finds out of 26 analysts keeping an eye on the stock, 9 are bullish, 7 sidelined and 10 bearish. The consensus Hold rating matches the consensus price target of $331.70, which shows a potential downside of nearly 10%. (See TSLA’s price targets and analyst ratings on TipRanks)