Should Tesla (TSLA) Investors Be Nervous as Consumer Reports Just Bashed the Model 3?

Considering Consumer Reports has a history of not grasping just how "groundbreaking" a mass market product can be, Gene Munster defends Tesla's potential here.


Tech expert Gene Munster, managing partner at venture capital firm Loup Ventures is out shedding light on Tesla (NASDAQ:TSLA) after Consumer Reports’ first review of the Model 3 failed to earn a recommendation. Specifically, the Model 3’s temperamental braking came under fire, along with convoluted user controls, rear seats that lack support, and the general “excessive” commotion of highway racket. Yet, considering that in context, Consumer Reports likewise found faults that “went to be trivial” in the original iPhone, Munster takes the negative review with a grain of salt.

“Elon Musk tweeted that the braking issues can largely be solved with firmware, software, or hardware updates (we think in the next year), at which point CR will retest the vehicle. While the CR review feeds into the ‘Tesla’s in trouble’ narrative, the fact remains that Tesla has more demand than it can supply for the Model 3. […] We continue to believe the Model 3 will represent the turning point in the world’s adoption of EVs,” explains the research analyst.

In turn, CEO Elon Musk countered on Twitter that there should be no worries on any erratic breaking distances. Through an over-the-air software upgrade to the brake calibration algorithm, the auto empire’s leader promises every future Model 3 will boast “amazing braking ability at no expense to customers.” As far as Munster is concerned, Consumer Report’s criticism of the car is overblown: “The report’s negative comments overshadowed an otherwise positive review, highlighted by the fact that the Model 3’s 350-mile range was the longest ever recorded in a CR test.”

At the end of the day, “If Tesla accomplishes an over-the-air improvement in braking performance, it may earn CR’s recommendation and demonstrate the power of over-the-air updates,” argues Munster, who notes that should a hardware upgrade prove to be imperative, this can just be tacked on to “the list of challenges Musk is facing.” That said, “We see this review as another speed bump on the Model 3’s path to transforming the industry and we remain optimistic about its ability to do so,” concludes the analyst, still placing a strong bet behind the legendary Tesla name.

TipRanks reveals investors are antsy on the Street on the challenged electric auto empire, but expectations still slant toward positive sentiment. Out of 22 analysts polled in the last 3 months, 6 are bullish on TSLA stock, 9 remain sidelined, while 7 are bearish on the stock. With a return potential of 7%, the stock’s consensus target price stands at $296.00.

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