Tesla Inc (TSLA) Needs Big Production Numbers This Week
Tesla Inc (Nasdaq: TSLA) has yet another chance to hit a key Model 3 target when it reports its quarterly production numbers sometime this week. Analysts say Tesla has a chance to finally hit its 5,000-vehicle-per-week Model 3 production rate, but there are still plenty of concerns about the company's longer-term picture.
Goldman Sachs analyst David Tamberrino says Tesla will likely release its second-quarter numbers on Tuesday and predicts full-quarter Model 3 production numbers will disappoint the market. Tamberrino says Tesla has a shot at hitting its 5,000-per-week target given it has added two additional production lines in recent weeks.
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"The question that will remain is how sustainable that run-rate of production is for [the third quarter] given the historical volatility of the Model 3 production rate, where Tesla has taken intermittent downtime," Tamberrino says.
Tesla CEO Elon Musk originally told investors Tesla would be producing 5,000 Model 3s per week by the end of 2017. But Tamberrino says TSLA stock may not have the type of positive reaction bulls are hoping for even it it hits its weekly Model 3 target.
"We believe that the market was previously anticipating a further push-out of the 5,000-per-week production rate when shares were trading in the $280 range, and now believe that shares are pricing in a sustained 5,000-per-week production rate," he says.
Goldman is predicting Tesla will report total second quarter Model 3 production of 22,000 vehicles, well below consensus estimates of 28,000 vehicles. However, Goldman is estimating Tesla produced a combined 23,000 Model X and Model S vehicles in the second quarter, slightly above consensus forecasts of 22,300.
Despite the positive headlines Tesla could get from hitting its 5,000-per-week Model 3 target, Tamberrino says long-term investors have already begin to shift their attention elsewhere. The company will need to show progress on improving gross margins and profitability to generate further upside for TSLA stock, he says.
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At its current price, Tamberrino says Tesla's stock is grossly overvalued. Goldman values Tesla's automotive business at $170 per share, its Energy business at $20 per share and its Solar business at $5 per share.
Goldman Sachs has a "sell" rating and $195 price target for TSLA stock.
Wayne Duggan is a freelance investment strategy reporter with a focus on energy and emerging market stocks. He has a degree in brain and cognitive sciences from the Massachusetts Institute of Technology and specializes in the psychological challenges of investing. He is a senior financial market reporter for Benzinga and has contributed financial market analysis to Motley Fool, Seeking Alpha and InvestorPlace. He is also the author of the book "Beating Wall Street With Common Sense," which focuses on the practical strategies he has used to outperform the stock market. You can follow him on Twitter @DugganSense, check out his latest content at tradingcommonsense.com or email him at wpd@tradingcommonsense.com.
