With the unexpected resolution to a lawsuit filed by the Securities and Exchange Commission that threatened to throw Tesla (TSLA) into unprecedented chaos, bulls and bears are now back to the “red pill vs. blue pill debate” over the underlining fundamentals for the stock.
To the company’s credit, its third-quarter vehicle deliveries (reported Tuesday) exceeded consensus expectations across the board. Specifically, Model 3 deliveries of 55,840 exceeded consensus estimates of approx. 52,000. Models S and X were even stronger; Model S deliveries of 14,470 outpaced consensus expectations of 13,000 and Model X deliveries of 13,190 exceeded consensus of 12,900. Furthermore, total vehicle production rose from 40,740 vehicles in 2Q18 to 83,500 in 3Q18, up over 100% sequentially.
Nomura analyst Romit Shah expects investors to view both developments favorably. However, the analyst believes the stock could remain range-bound until there is more clarity on Tesla’s profitability and cash position.
As such, Shah reiterates a Neutral rating on Tesla shares, with a price target of $300, which represents a potential upside of 12% from where the stock is currently trading. (To watch Shah’s track record, click here)
Shah noted, “The focus now turns to financials. If Tesla can exhibit profitability and an improved cash position over the next 3-6 months, we believe the stock could move meaningfully higher. We have adjusted our estimates marginally to reflect 3Q18 deliveries and the relief of production constraints. We raise our 3Q18E revenue estimates from $6.5bn to $6.9bn, EPS from $0.54 to $0.88, and FCF declines slightly from $559mn to $410mn, owing to still elevated vehicles in transit (and thus inventory) balance. For FY2018E, our revenue estimates go from $21.6bn to $22.1bn, loss per share from -$3.20 to -$2.81 and FCF declines from -$640mn to -$929mn.”
Net net, the battle seems to be torn between the bulls, bears and the fence sitters as TipRanks analytics demonstrate the electric car giant as a Hold. Based on 26 analysts polled in the last 3 months, 6 rate a Buy on Tesla stock, 10 maintain a Hold, while 10 recommend a Sell. However, with a return potential of nearly 17%, the stock’s consensus target price stands at $315.48. (See TSLA’s price targets and analyst ratings on TipRanks)