Sure, Tesla Inc (NASDAQ:TSLA) once again overpromised and underdelivered on its original Model 3 production targets; but when glancing towards the future, one of Wall Street’s savviest tech experts believes there is too much importance on these targets.
A veteran of betting wisely on tech stocks, Gene Munster – from his research-driven, venture capital firm Loup Ventures – offers perspective that firstly, the TSLA underclass on Model 3 production was not as bad as anticipated by investors.
The company merely came up short of its own lofty guide calling for 2,500 with production of 2,000 per week for the first quarter of 2018. Keep in mind, this is a company that was able to double its Model 3 production run rate between the fourth quarter of 2017 and the first quarter of 2018, argues Munster. This means Tesla has achieved “20% of the way to its goal of 10,000 Model 3s per week,” and the analyst wagers this can be realized by the middle of next year. For the second quarter, Munster likewise angles for Model 3 production to double once more, taking production up to 4,000 vehicles per week. The TSLA team maintained its target to close out the second quarter of 2018 at a run rate of 5,000 Model 3s each week. Notably, Munster bets a little under this goal, forecasting 4,000 per week.
“Tesla addressed the investor cash concern, predicting they will not need to raise money in 2018,” notes Munster, who asserts that on a bullish note: “While on a bumpy road, we believe Tesla remains exceptionally positioned for the future around EV, autonomy, and sustainable energy.”
“To factor in Mar-18’s miss, we are lowering our 2018 Model production estimate to 161k from 168k.”Overall, Munster urges investors to keep their eyes open to the “bigger” picture beyond just missed ambitious production targets: “Mar-18 is the third out of three quarters that they have failed to meet this important target. Investors are up in arms over these misses and have lost confidence in Tesla’s production guidance. While we share some of the same frustration, this hyperfocus on missing high, self-imposed production targets causes investors to miss the bigger story, which involves the company nicely ramping production of a car that is exceptionally difficult to produce and could potentially usher in global adoption of EVs.”
Ten quarters from now, the analyst believes Tesla can hit profitability. Before the third quarter of 2020, Munster looks for TSLA to become cashflow positive.
TipRanks showcases TSLA as an empire that makes Wall Street cautious. Out of 20 analysts polled in the last 3 months, 5 are bullish on the stock, 9 remain sidelined, while 6 are bearish. With a return potential of 8%, the stock’s consensus target price stands at $310.00.