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Tesla’s (TSLA) Driving Backward: GBH Shares Two Cents on the Latest Model 3 Standstill

GBH Insights' Daniel Ives continues to bat for the bulls on Tesla's challenge-laced narrative, but the latest obstacle in Model 3 production is not great news.


Yesterday afternoon, Tesla (NASDAQ:TSLA) indicated production at its core Fremont factory is once more stalling production momentum- this time for the final week of May. The challenged auto empire’s goal: beef up the assembly line for an incredibly volatile Model 3 production narrative.

GBH Insights analyst Daniel Ives still roots for the Tesla story, but acknowledges this marks “another shut down on the horizon” for the tech giant, which even if “somewhat expected,” nonetheless “adds to Street concerns on Model 3.”

The analyst reiterates an Attractive rating on TSLA stock with a $320 price target, which implies a close to 13% upside from current levels. (To watch Ives’ track record, click here)

“While Musk & Co. already announced 10 days of temporary shutdowns this quarter in hopes of fixing and smoothing out manufacturing issues and bottlenecks that have been the black cloud over Tesla for the last six months, this latest news adds to some of the Street worries around all-important Model 3 production targets,” explains Ives.

It does not help matters that the company’s senior engineering lead Doug Field just announced a “break,” with an impending “flatter management structure” brewing at headquarters. To put it bluntly, it has been a rocky period for TSLA shareholders who have had to confront each production ‘choke point’ for the Model 3 with a great deal of patients. Could hellish production at last “slowly,” but surely be shifting in a more promising “direction” for Tesla? Ives wagers yes, still sizing this up as the absolute “linchpin” for the electric car giant’s success over the long term.

Ives notes, “However, any further shutdowns and bottlenecks could be the straw that broke the camel’s back towards hitting the 5,000 target, which remains the key risk to the story along with the cash burn situation/potentially raising capital in 2019. We are closely watching progress on the bottleneck situation as Musk rolling up his sleeves along with his engineering team looking to smooth out some of the clear production issues will be a major positive catalyst for shares moving forward if successful.”

Even though the company is not yet close to its original objective to reach 5,000 per week objective on the Model 3, Ives sees reason to be reassured by strides made forward in the field. Ives’ eyes are peeled ahead to the summer, where key targets achieved by late June to early July are key to not only the stock but the company’s cash burn predicament. Model 3 production did not need any more “worries” added to investor fears, and the analyst surmises: “this latest shutdown [was] not the news the bulls were hoping for.”

TipRanks indicates apprehension settling above TSLA shares, with 4 bullish out of 20 analysts polled in the last 3 months, but 9 sidelined and 7 bearish. Notably, the 12-month average price target stands at $282.40, aligning evenly with where the stock is currently trading.