Tesla Should Exceed Low Production Bar; Analyst Says Buy On Pessimism

Tesla Inc TSLA is down 15.6 percent month-over-month as investors brace for poor Model 3 rollout rates. But some analysts expect a trouncing of low expectations.

The Rating

Baird Equity Research analysts Ben Kallo and David Katter maintained an Outperform rating on Tesla with a $411 price target.

The Thesis

Pessimism surrounding first-quarter Model 3 production rates is seen to bode well for Tesla, which enjoys a low, beatable bar.

“We are lowering delivery estimates, but are buyers headed into Q1 deliveries as we believe sentiment is overly negative and think TSLA could exceed lowered expectations,” Kallo and Katter wrote in a Monday note.

Baird expects Tesla to achieve a weekly rate of 2,500 Model 3s within weeks, although not necessarily by the end of the quarter as promised.

“Importantly, we think production will be back-end loaded, which could cause deliveries to spill into Q2,” the analysts wrote.

They lowered first-quarter delivery forecasts from 12,250 Model Ss, 10,000 Model Xs and 10,000 Model 3s to respective figures of 10,000, 10,000 and 8,000. They also reduced 2019 estimates for Model S and X deliveries based on bottleneck expectations.

Baird anticipates quarterly delivery numbers by April 3.

Price Action

Tesla shares opened up nearly 2 percent Monday, but waned to trade down 1.5 percent at time of publication at $296.93.

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