Of late, Tesla (NASDAQ:TSLA) investors have been more interested than ever in actual delivery numbers for the Model 3. Up until now, Wall Street had given the electric car giant loose reins when it comes to promises versus actual deliveries. There were also recent claims of shortcuts in brake testing procedures and tent production facilities, so the overall picture is mixed.
Gene Munster, a respected former stock analyst, believes TSLA stock will be a bumpy ride over the next few years, however, he remains optimistic that Tesla represents considerable upside in large-cap tech over the next 2-5 years.
Munster wrote, “Tesla is getting better at producing Model 3s. While average weekly production was consistent from the end of the March quarter at 2,400 per week, it was an increase from the 633 average weekly production in the March quarter.”
“While the company stopped a standard brake and alignment test, it did so because the test was redundant. There were no brake problems reported beyond the Consumer Report test which Tesla fixed with a software update,” the analyst added.
There’s certainly the distinct possibility that Tesla turns profitable in 2018, but will it last? Munster opined: “Tesla is still 3-4 quarters away from sustained profitability given that a favorable ASP mix on Model 3 will inch the company into profits in the Sep-18 and Dec-18 quarters. The key is that demand remains high for Model 3 and production is improving. As that scales in 2019, the company should have more sustained profits. One note: the company will dip back into a temporary loss when it ramps production of Model Y (SUV) in 2020.”
But the Street does not share this optimism — quite the contrary. Right now, TSLA stock has a Hold analyst consensus rating with only 7 recent Buy ratings. This is versus 8 Hold and 9 sell ratings. Meanwhile, the $301.35 price target suggests a downside potential of 6% from the current share price.