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.

With Tesla (TSLA) Stock Rising, Will Production Challenges Bring It Back Down?


Just a few weeks ago, Tesla (TSLA) CEO Elon Musk said the company was not facing a “demand problem.” Maybe he was right. But it doesn’t change the fact that Tesla is facing an old problem: Production.

Leaked documents show that the company isn’t living up to the production goals Musk set last month. In an email, the CEO said he wanted to see 1,000 Model 3 cars built per day; in the days since that email, the company has only eclipsed this once. While this is not indicative of final production figures, this does give us a clue that, perhaps, Tesla is back battling an old foe. Further, the company has proved in the past it is able to ramp up production if needed — it built 5,000 Model 3s in the last week of the second quarter last year, after averaging about 2,200 vehicles per week for the rest of the quarter.

Deutsche Bank’s Emmanuel Rosner met with Tesla at its Fremont plant this week, where he says the company made “positive comments about current orders and production trends for its vehicles,” even as rumors maintain the company is struggling. The analyst believes second quarter deliveries “could come in around 85k,” below guidance but above what many expect.

Rosner maintains his Hold rating on Tesla stock, while lowering his price target from $280 to $240, which implies 8% upside from where the stock is currently trading. (To watch Rosner’s track record, click here)

Rosner is decreasing revenue/EPS from $6.2bn/-$0.71 to $5.9bn/-$0.95 and expecting FCF to be breakeven, while also cutting 2019E and beyond estimates on lower assumed volumes.

Overall, though Rosner is a bit more bearish on Tesla numbers, he believes “the stock could continue its recent positive trend into the 2Q delivery release as investor concerns around near-term demand abate.” Shares are up over 20% this month, but the analyst still sees the debate shifting back “quickly after to Tesla’s normalized mix and margin profile.”

All in all, the electric car giant is facing major challenges. Today, it is production. Tomorrow, it could be demand, financing or internal squabbles. So while Tesla stock is climbing, many are still nervous about how Tesla plays the short-term. TipRanks analysis of 25 analyst shows a Hold consensus, with nine analysts saying Buy, five saying Hold and 11 recommending Sell. The average price target among these analysts stand at $272.48, which represents about 23% increase from current levels. (See TSLA’s price targets and analyst ratings on TipRanks)

 

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