How The Experts Reacted To Tesla's Q3 Deliveries

Tesla Inc TSLA falling short of its production goals in the third quarter has Wall Street analysts weighing in on the company's "production bottlenecks."

In the third quarter, Tesla produced 260 Model 3 vehicles and delivered just 220, against its Aug. 2 forecast of over 1,500 units.

Morgan Stanley Downplays Delivery Shortfall

Adam Jonasof Morgan Stanley is downplaying Tesla’s delivery shortfall, saying most auto launches have hiccups and Tesla is no exception. The analyst believes there is some risk in micro-analyzing the monthly ramp of the Model 3, and Tesla shares are more dependent on the company’s access to capital markets, not deliveries.

“Quality and attractiveness of early production is far more important than the quantity delivered – at least for now. Our 2018 target of 120k Model 3 deliveries continues to bake in high levels of uncertainty around future production bottlenecks,” said Jonas.

Morgan Stanley maintains an Equal-Weight rating on Tesla with a $317 price target.

Bernstein Remains Cautious

Toni Sacconaghi of Bernstein was slightly more cautious of the disappointing Model 3 delivery numbers and believes the biggest questions remain unanswered.

“Model 3 production was worse than the most pessimistic whisper numbers and reinforces our concern over its ramp and margin trajectory,” said the analyst.

“We continue to believe that the Tesla investment thesis hinges on the success of Model 3, and the company’s ability to ramp production, make the car profitably, and deliver good initial build quality.”

Despite this cautionary stance, Bernstein did highlight that although Model 3 production hit a snag, Model S and X deliveries were better than expected as Tesla raised its FY17 outlook to 100,000 vehicles, a 31 percent increase year over year.

Bernstein maintains a Market Perform rating on Tesla with a $265 price target.

Baird Says Buy On Weakness

With demand for the Model S and X strong, Baird Equity Research recommends buying on any weakness. Baird analyst Ben Kallo does not see any fundament issues with the Model 3 production or supply chain, saying the company will address its issues in the near-term.

“We continue to like the stock given strong vehicle demand, the ongoing ramp of Model 3 production, and several upcoming catalysts which should drive shares higher,” said Kallo.

Baird sees six catalysts for Tesla:

1. Increased Model 3 production and ramp in gross margin.
2. The Semi Truck unveil in October.
3. Additional Tesla Energy project sales and announcements.
4. Reviews of the Tesla Roof.
5. Announcements about additional gigafactories.
6. Potentially the introduction of new products not yet discussed.

Baird maintains an Outperform rating on Tesla with a $411 price target.

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