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BofA Remains 'Skeptical' On Tesla Model 3 Production After Investor Meetings, Expects Capital Raise

BofA Remains 'Skeptical' On Tesla Model 3 Production After Investor Meetings, Expects Capital Raise
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Even a day with Tesla Inc (NASDAQ: TSLA)’s senior director of investor relations couldn’t assuage one of the Street’s most bearish analysts.

The Rating

Bank of America Merrill Lynch analyst John Murphy maintained an Underperform rating on Tesla with a $180 price target in a Wednesday note. 

The Thesis

Murphy regards Tesla’s construction of a Shanghai factory “prudent” in helping evade tariffs and penetrate a significant global market. What’s more, he concedes that Tesla’s benefiting from a vacuum in the electric vehicle market, even as competition rises on all sides. (See the analyst's track record here.) 

But the BofA analyst remains unconvinced that Tesla will sustain and continue to raise production rates.

“Although TSLA is confident in the sustainability of its production rate, based on its past challenges in ramping up production, we remain somewhat skeptical and believe it will take some time before the Model 3 production reaches material scale." 

Despite Tesla’s claims to the contrary, Murphy expects the slow Model 3 ramp and accompanying cash burn to necessitate a near-term capital raise.

Price Action

Tesla shares were down 1.09 percent at $318.96 at the close Wednesday. 

Related Links:

Barclays: Tesla Sell-Off Could Continue Into Earnings, But Watch For A 'Bear Trap' In Q2 Report

Elon Musk Takes Aim At Media Again As Tesla's Stock Moves Lower

Photo courtesy of Tesla. 

Latest Ratings for TSLA

Jul 2018NeedhamDowngradesHoldUnderperform
Jun 2018Vertical GroupMaintainsSellSell
Jun 2018NomuraReiteratesBuyBuy

View More Analyst Ratings for TSLA
View the Latest Analyst Ratings

Posted-In: Bank of America Merrill Lynch John MurphyAnalyst Color Price Target Reiteration Analyst Ratings Best of Benzinga


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