Tesla (TSLA) Stock: Here’s Why Tech Guru Gene Munster Just Got More Confident on Model 3 Production

Loup Ventures' Gene Munster sees reason investors will be happier with the Model 3 ramp come summer.


Tesla (NASDAQ:TSLA) has set ambitious targets for its challenged Model 3 ramp that has faced what even CEO Elon Musk acknowledges as the heat of “production hell.” Yet, could production be on the brink of a breakthrough?

Expert of the tech-verse Gene Munster – sharing his two cents from his research-driven, venture capital firm Loup Ventures – wagers says following a treasure “trove” of Model 3 production details, where Musk outlines plans to reach targets by the summer. Musk intends to boost profitability along with internal efficiency to get the Model 3 production ramp revving, and Munster likes what he sees.

“This makes us more confident in Tesla’s ability to ramp Model 3 production to a level that will satisfy investors in the Jun-18 quarter,” cheers the research analyst, who adds on another bullish note: “Tesla will be pausing Model 3 production for retooling. While this sounds bad, it’s actually a good thing.”

The analyst pinpoints six encouraging takeaways from the intel revealed in Musk’s email:

1) Production throughout the last 3 weeks has hit 2020 in the first week, 2070 by the second, and 2250 by the third, jumping 10% from the numbers released at the start of April.

2) Production may be on hold for three to five days amid “comprehensive” upgrades, but Munster bets this leads to 3,000 to 4,000 Model 3s produced each week by May.

3) By May, production is primed for another pause, which should translate to 6,000 Model 3s per week in capacity the end of June.

4) The intent to aim for 6,000 Model 3s produced per week offers “margin of error” breathing room when achieving the real goal: 5,000 per week. Munster estimates production will hit 4,000 per week closing out June.

5) Though the Fremont factory is taking a shift to operations 24/7, the timing appears ambiguous to Munster. To ensure the transition, the TSLA team is ready to hire around 400 people each week for various weeks.

6) Tesla’s CEO intends to assume a “more active role,” Munster explains, which will mean giving personal approval of beyond $1 million in expenses and will likewise ask for more “streamlined internal communication.”

Before, rumors had been flying rampant of production closed from malfunctions in design or car production. Now, based on the new memo, the analyst anticipates these stalls in Model 3 production actually give the giant the time it needs to improve its line- hopefully leading to a jump in output. All of this matters for Model 3 production to vault from a present day rate of roughly 100,000 cars per year to beyond 500,000 per year in the span of the upcoming year and a half.

In a nutshell, the question lingers for a company that has confronted a slew of negative publicity recently: “How long will investors continue to support the Tesla story?” Munster answers for the bulls: “We think the answer is a long time. Core Tesla investors are less interested in the week to week news cycle and more interested in finding companies that have open-ended growth opportunities. Despite all of the hair on the Tesla story, the company remains ideally positioned for growth around the themes of renewable energy, storage, electric vehicles, and autonomous transport. We believe, given the size of Tesla’s addressable markets, that investors will remain committed in the form of holding shares and participating in future fundraising.”

TipRanks suggests caution rules the Street when it comes to this electric auto empire’s market opportunity at play. Out of 21 analysts polled in the last 3 months, 5 are bullish on TSLA stock, 9 remain sidelined, while 7 are bearish on the stock. The 12-month average price target stands at $294.07, aligning with where the stock is.

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