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Europe Expansion Is Critical to the Long-Term Success of Tesla (TSLA) Stock


Tesla (TSLA) has major global markets to expand to where it can try to take full advantage of pent-up demand for the vehicle before it brings to market lower-cost versions. One of these markets is Europe.

The electric car giant has just begun shipping Model 3s to Europe, where there’s still untapped demand for the higher-trim models. This suggests there’s still hope for profits to continue going strong in the early part of 2019 at least.

Wedbush analyst Daniel Ives noted, “We expect a steady stream of cargo ships currently in the Atlantic to hit Zeebrugge over the coming weeks as the long awaited flagship Model 3 is delivered to customers throughout Europe. To this point, we will be in Europe later this week as we plan to gauge demand/delivery logistics on the ground especially in our trip to Oslo, Norway which looks to be the epicenter of demand for Model 3 with overall EV sales growing in the country by 40%+ and a strong ramp expected this year with Tesla leading the charge. Norway, the Netherlands, and Germany are front and center as the countries with strong pent up demand for Model 3’s in Europe out of the gates with ~20,000 pre-orders expected to be filled over the next few weeks in the region. The big question for investors will be watching this Model 3 demand trajectory throughout Europe to gauge the pace of unit deliveries and how quickly can it reach the 100,000 units delivery barometer over the next 12 months in this key region, with China also a demand driver/potential wild card. While there have been some delivery speed bumps/service snafus in the European delivery process, it appears the timing of deliveries and ramping demand is on track almost midway through 1Q.”

“Overall, the profitability picture for 2019 and the all-important Model 3 demand trajectory in Europe for Tesla looks encouraging for Musk & Co., but there is clearly heavy lifting ahead around Europe logistics/cost-cutting/driving incremental US demand that will remain overhangs and thus make Tesla a “prove me” story the next few quarters,” the analyst concluded.

All in all, Ives reiterates an Outperform rating on Tesla stock with a price target of $390, which represents a potential upside of 23% from where the stock is currently trading. (To watch Ives’ track record, click here)

Granted, not everyone is as enthusiastic about TSLA as Ives, as TipRanks analytics reveal the stock as a Hold. Out of 21 analysts polled in the last 3 months, 8 are bullish on Tesla stock, 5 remain sidelined, while 8 are bearish. The 12-month average price target stands at $326.05, which aligns evenly with where the stock is currently trading. Wall Street needs to see more from Musk’s empire before getting more confident on the story. (See TSLA’s price targets and analyst ratings on TipRanks)

 

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