Tesla Stock Expensive Near Term, But Analysts Look To The Future

One Wall Street analyst dialed back near-term expectations for Tesla Inc TSLA Tuesday but reiterated his bullish long-term thesis. According to Guggenheim analyst Robert Cihra, Tesla’s recent $1.8 billion bond sale and its $3,000 Model X price cut may weigh on earnings in coming months, but they are no reason for investors to miss out on Tesla’s potential years down the road.

Guggenheim reduced its full-year 2017 EPS estimate for Tesla from a $7.27 loss to a $7.47 loss. In addition, Cihra raised his expectation for Tesla’s 2018 operating expenses, another factor that could weigh on earnings. However, Guggenheim still believes Tesla can make a major turn and reach profitability by 2018, eventually reaching EPS of nearly $15 by 2019.

Related Link: Baird Analyst: Tesla Is Not A Good Short With Model 3 On Its Way

Cihra estimates that Tesla’s recent bond sale put the company on track to finish the third quarter with $4.5 billion in cash. He believes Tesla has already passed its peak cash burn of more than $900 million in the second quarter and the company will become “meaningfully” free-cash-flow positive as early as 2019.

When it comes to the Model 3, Cihra is forecasting 25,000 in vehicle sales volume in 2018. He also expects total Tesla sales volume to eclipse 720,000 annually by 2020.

Cihra says investors concerned about Tesla’s lofty share price need to consider Tesla’s long-term prospects.

“While recognizing TSLA remains expensive on near-term metrics, we continue to value it on 2020E numbers, expecting the ramp of its new Model 3 to drive revenue and margin growth for several consecutive quarters, as volumes now leverage off the high fixed-cost structure Tesla has been building,” Cihra wrote.

Guggenheim maintains a Buy rating for Tesla and a $430 price target for the stock.

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