Love it or hate it — and for most investors, there’s no middle ground — Tesla (TSLA) has been one of the most talked-about stocks for years now. The bears claim that Tesla will be facing some trouble in the near term. Its cash is running low, and sales of its mass-market Model 3 could be headed for a fall in 2019. Furthermore, Tesla’s quality continues to be a significant concern as major automakers prepare to release a slew of competitive electric vehicles over the next couple of years. On the other hand, bulls, like Wedbush’s Daniel Ives, believe that while the latest quarter was a bit dicey, the miss was still fairly mild and there should be more catalysts to gin up demand.
Ives reiterates an Outperform rating on Tesla stock with a price target of $440, which represents a potential upside of 28% from where the stock is currently trading. (To watch Ives’ track record, click here)
Ives commented, “Tesla has started to turn the corner on Model 3 production, demand looks healthy into 2019 and beyond based on underlying drivers for the EV market and Europe/ China hitting the ground, and now the financial model is poised to generate improved profitability/cash flow putting the risk of a capital raise in the background for now. However, there is no room for major production errors or another distraction from Musk & Co. as a cash flow balancing act is needed. Looking out over the next decade, we believe Tesla and Model 3 have the opportunity to transform consumer auto buying behavior and capitalize on this unprecedented market opportunity and its leadership position in the EV market. From a capex perspective we believe levels of $2.2 billion to $2.3 billion are fair for FY2019 with a ramp to $2.7 billion in FY20 based on our analysis with more resources around Gigafactory 3 in China (construction started this week) as a driver for potentially higher levels of investments looking ahead. While Tesla remains a rollercoaster ride, we believe European deliveries hitting the ground in 1Q and a steady production ramp out of Fremont remain key variables for the bulls/bears to debate heading into another pivotal earnings report and guidance.”
The majority of the Street doesn’t side with Ives’ bullish take on the electric car giant, as TipRanks analytics demonstrate TSLA as a Hold. Out of 25 analysts polled in the last 3 months, 10 are bullish on Tesla stock, while 7 remain sidelined and 8 bearish on the stock. With a slight downside potential, the stock’s consensus target price stands at $333.27. (See TSLA’s price targets and analyst ratings on TipRanks)