This Tesla Analyst Is Waiting Until 2016 For Catalysts

• Tesla Motors Inc TSLA shares are down 3 percent year-to-date, even after hitting a high of $282.26 on July 20.
• Baird’s Ben Kallo maintained a Neutral rating on the company, with a price target of $282.
• The Model X production ramp is taking longer than expected and bearish sentiment could persist till 1Q16, Kallo mentioned.

Analyst Ben Kallo expects Tesla to record 3Q15 non-GAAP revenue of $1,150 million and non-GAAP net income of ($66.5 million), missing the consensus estimates of $1,263 million and ($65.3 million), respectively.

The company is likely to report 3Q margin of 22.9 percent and non-GAAP EPS of ($0.52), versus the consensus estimates of 24.1 percent and ($0.53), respectively.

The production ramp for Model X appears to be taking longer than was previously expected, with Tesla continuing to fine-tune its processes. Kallo believes that this fine-tuning could take 1-2 quarters.

For 4Q, the Model X delivery estimate has been reduced from 1.5K to 1K, along with about 18.5K Model S deliveries. The analyst mentioned that Tesla could meet the low end of its 2015 guidance, although this would require the company to deliver about 17K vehicles in Q4, implying “a steep production ramp of the Model S.”

Kallo commented that Tesla would need to produce “a few thousand” Model X vehicles to inspire any confidence in its production ability. The argument that Tesla would be unable to achieve margin expansion for Model X, given the vehicle’s complexity, appears to be “unfounded,” although the margin ramp could take time as the company streamlines its production process.

While there are catalysts ahead, “most will not occur until Q1:16 allowing bearish sentiment to persist,” Kallo wrote.