Tesla’s (TSLA) Fundamentals Should Drive the Stock Higher, Says Oppenheimer

Since Tesla (NASDAQ:TSLA) CEO Elon Musk revealed the idea of taking the electric car giant private, headlines about the automaker have mostly shifted away from the company’s Model 3 production ramp-up. But whether Tesla goes private or not, Model 3 production remains the most important determinant for the company’s long-term success.

Oppenheimer analyst Colin Rusch believes that while TSLA’s take-private scenario and communication have driven stock movement in the last couple of weeks, fundamentals appear to be improving for the company (including Inside EVs’ estimate of 14,250 Model 3s shipped in the US in July) and are likely to become a key focus as the corporate structure and legal scenario become more settled.

“We continue to believe GM and cash flow will dictate fundamental stock activity. As a follow-up to our July 30 cash GM sensitivity analysis, we believe TSLA’s working capital management is critical to understanding its cash position. The company generates positive working capital as it ramps, and we believe TSLA is positioned to generate better than expected cash flow in 2H:18 which we expect could drive shares higher,” Rusch noted.

Where’s the stock heading next? Rusch answers: “We expect legal and corporate structural speculation to drive shares near term, understanding that a quick resolution to these issues is unlikely, and increased legal expense and possible fines are being digested by investors. But in coming weeks, as those issues are better understood, we expect fundamentals to again drive shares. We remain constructive on fundamentals.”

Net net, Rusch reiterates an Outperform rating on Tesla shares, with a price target of $385, which implies an upside of 26% from current levels. (To watch Rusch’s track record, click here)

If we step back and look at the bigger picture, we can see that the Street does not share this optimism, as TipRanks analytics demonstrate TSLA as a Hold. Out of 25 analysts polled in the last 3 months, 10 are bullish on Tesla stock, 7 remain sidelined, while 8 are bearish on the stock. However, with a return potential of nearly 11%, the stock’s consensus target price stands at $338.15.

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