Is Tesla (TSLA) Ready to Sustainably Disrupt the Transportation Market? Oppenheimer Weighs in

Oppenheimer's Colin Rusch shares his insights on the key question mark circling overhead TSLA shares: sustainable disruption of the transportation market.


Does Tesla Inc (NASDAQ:TSLA) stand to “sustainably disrupt” the transportation arena? Oppenheimer analyst Colin Rusch weighs in on the sidelines, with questions circling the auto empire’s Autopilot, the pace of its product rollout, and operational focus.

Paying attention to both cutthroat competition and rising obstacles racing between manufacturing and self-driving technologies, the analyst reiterates a Perform rating on TSLA stock without listing a price target. (To watch Rusch’s track record, click here)

Rusch explains, “As TSLA begins producing the dual-motor Model 3 while working to get burst production levels on the Model 3 to 5,000/week, we believe the fundamental question facing shares is whether or not the company can sustainably disrupt the transportation market. We believe it is possible but will require an operational focus at higher levels than we’ve seen in recent years, given mounting competition and execution challenges in both manufacturing and autonomous technologies. We believe TSLA would be well served to continue narrowing focus to existing consumer product roll-out and updates, raising equity to de-risk Model 3/Y ramp timelines and credit concerns, and would be cautious on an entrance into China-based manufacturing, given the complexity of such an endeavor, as it works to optimize existing manufacturing.”

Keep in mind, the company’s Autopilot failed to measure up to the state of California’s expectations for autonomous mode, with Tesla not posting any disengagement last year against the GM Cruise’s 105 and Waymo’s 63. This could narrow investor understanding into what Rusch calls the strongest “public record of autonomous technology proficiency and a key driver of disruption.”

Meanwhile, even though the electric car giant has three new products rolling out throughout the next five years, with around 2.5 years spaced between each product ramp, as well as a new Model Y platform unleashed, the analyst frankly does not anticipate an “acceleration” here. That said, revving through an addressable market booming over 5 million vehicles worldwide with a target gross margin of roughly 25%, Rusch spots meaningful pathway for gains with Tesla’s present offerings. The analyst believes Tesla could glean advantage from a Model S/X refresh as well as a “narrower product focus” to bring manufacturing expenses back down.

Overall, TSLA would be wise to reach a “balance” of not only sustaining, but likewise increasing market share just as it trailblazes in “adjacent markets,” wagers Rusch; all amid combing through just-revealed restructuring plans. The analyst anticipates investors have an eye on another capital raise, which Rusch would take as a “positive catalyst” for the company.

TipRanks suggests caution with a hint of positivity circulates through Wall Street around this auto empire’s opportunity ahead. 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 4%, the stock’s consensus target price stands at $296.00.

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