Jon Hadad

About the Author Jon Hadad

Jon Hadad graduated from the University of Delaware with a degree in political science. Prior to joining the Smarter Analyst team, he was an industry analyst at a New York research firm.

If Demand Isn’t Holding Back Tesla (TSLA) Stock, What Is?


Don’t call it a demand problem. At least, that’s what Elon Musk is telling Tesla (TSLA) investors.

Hosting its annual shareholder meeting last Tuesday, Musk said, “I want to be clear: There is not a demand problem.” However, in many investors’ and analysts’ minds a lack of demand was the primary reason that Tesla’s most recent quarter resulted in worse-than-expect deliveries. But Musk argues that demand across all three models, — the Model X, Y and 3 — are “outpacing production,” so far this quarter, adding that the company may have a record quarter in both deliveries and production. 

Analyst Daniel Ives of Wedbush said Tesla is “talking the talk” but must “walk the walk,” as he maintains his Neutral rating and $230 price target. (To watch Ives’ track record, click here). 

The company had hit records in the fourth-quarter last year (two quarters ago), but suffered a massive set back last quarter. Analyst Daniel Ives of Wedbush says Tesla is “talking the talk” but must “walk the walk,” as he maintains his neutral rating and $230 price target. (To watch the analyst’s track record, click here).

The analyst still believes Tesla is facing a “fork in the road scenario” in the near-term with its Model 3. Ives thinks “Tesla needs a significant rebound in Model 3 deliveries this quarter as well as into the back half of 2019 for the company to provide sustained profitability, which remains a hot button issue of the Street in light of the softness seen in the March quarter and the recent capital raise.”

CEO Musk discussed Tesla’s product roadmap at the conference, which includes the Model Y, Pickup and Semi. While Ives believes it is important to keep track of Tesla’s roadmap, he believes “the bigger question remains the company’s overall unit guidance for 2019 of 360k to 400k units and this quarter for 90k – 100k units, both still aggressive target in [his] opinion.” Ives still maintains that “hitting the 360k-400k unit demand guidance for 2019 is going to be a Herculean task as in a best case scenario we see 360k-370k and in a base case 340k-355k the likely path in our opinion.”

While the shareholder meeting was informative for Ives, he calls Tesla a “prove me story in the near-to-medium term,” as the analyst wants to see “improving Model 3 demand globally this quarter coupled with profitability in 2H19 to get behind Musk & Co’s Model Y, Pick-up and Semi ambitions.”

Though Tesla shares have climbed over the past few weeks, its stock is still down big for 2019. Many investors are nervous about the short-term, as the company continues to face challenges relating to financing, production and, yes, demand. TipRanks analysis of 24 analyst shows a Hold consensus, with eight analysts Buying, five saying Hold and 11 recommending Sell. There is a $264.50 price target on the stock, representing a 26% increase from current levels. (Click here to see TSLA’s ratings and price targets on TipRanks)

 

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