On Wednesday, Tesla Inc (NASDAQ:TSLA) released fourth quarter earnings for 2017, grabbing a record $3.3 billion in revenue in tow. However, the electric car empire likewise hit $276.7 million in negative free cash flow against $1.4 billion earned in the third quarter. Right now, all eyes are on the company’s mass-market Model 3 launch, with production that has not been rapid-fire to start. With a sharper than anticipated GAAP EPS loss for the quarter, shares took an almost 9% beating yesterday.
Guru of all things tech-verse Gene Munster – from his research-driven, venture capital firm Loup Ventures – approaches Musk’s brainchild as a valuable bet; one with compelling prospects in the electric vehicle and self-driving market alike.
It appears the age-old adage rings true here for Tesla: patience is a virtue. Munster wagers Tesla’s long-term opportunity is well-worth the wait: “Our confidence in Tesla’s ability to capitalize on the EV and autonomy opportunity remains unchanged. Our perspective that reaching this EV and autonomous future will take longer than most think, but be bigger than most think also remains unchanged.”
With the Model 3 ramp in mind, the research analyst is not surprised to see a boost anticipated in capital expenses for Tesla, with the TSLA team hoping to kickstart the next evolution of Model 3 production into gear. Munster notes, “We believe retooling could cause a temporary step down in production in the fall of 2018, and as a result, are lowering our Model 3 production target to 168,400 from 182,000.” For context, these expectations align with the Street. Closing out 2018, the analyst maintains his Model 3 production estimate at 7,150 vehicles and likewise “importantly” reiterates his forecasts between 2019 and 2023 for Model 3 numbers.
With regard to autonomy, Munster pays attention to Musk’s hope that the vision suite triple threat combo of camera, radar, and ultrasonic sensors wipe clean the reliance on LiDAR- the very laser sensor Tesla’s tech and car competitors usually pinpoint as fundamental for self-driving vehicles.
Ultimately, “Musk believes in taking the ‘hard path’ and using a sophisticated neural net to solve passive object identification with cameras instead of using lidar as a ‘crutch.’ In the long run, he believes this path will not only cost less and look better, but will produce a superior system capable of seeing through rain and sleet, and performing in more complex situations. This is important given that if Tesla is successful in using its vision suite instead of LiDAR, every Tesla produced today will be upgradable to full autonomy with a software update, which would catapult the company into the lead position in the race to autonomy,” Munster asserts.
TipRanks showcases a looming caution weighing heavy on analyst sentiment towards Tesla stock. Out of 19 analysts polled in the last 3 months, 5 are bullish, with the rest split between the neutral and the bearish: 7 hedging bets on the stock and 7 running for the hills. With a loss potential of 1%, the stock’s consensus target price stands at $311.53.