Tesla Motors is set to finally unveil the Model 3 on Thursday in what will be an extremely important event for the company’s stock. Investors and consumers alike have high expectations for the mass market vehicle as investors want to see evidence that it will boost Tesla’s market share while consumers want to see that the automaker won’t compromise quality for offering a lower-priced vehicle.
Expectations for the Model 3
Morgan Stanley analyst Adam Jonas, who has an Overweight rating and $333 per share price target on tesla stock, described his expectations for the Model 3, although he sees the car’s significance more in how it “fits into an emerging shared, autonomous public transport ecosystem.” He has repeatedly written on how Tesla can benefit from shared mobility, which he sees as the future of transportation.
He expects the automaker to start out the price at $35,000, as management said the price would start at, although he expects the average Model 3 order to come out higher than $60,000 in the beginning. He still expects management to say they plan to begin production by late next year and that they will reiterate plans to reach 500,000 vehicle sales by 2020, although he has set his forecast much more conservative. He’s not expecting Model 3 production to begin until late 2018 and is expecting Tesla’s volume to be less than 249,000 by 2020.
He doesn’t believe Tesla will release much in the way of details about the Model 3’s body styles, although he expects several options, including a 4-door sedan, coupe, cabriolet, small SUV and others.
The tech’s the thing for Tesla
Jonas expects Tesla to still live up to its brand image as a “‘no compromise'” high performance car, with a high degree of (human) driving pleasure.” He added that it would be a surprise if acceleration, handling and other specs weren’t in line with or even superior to those of the M or AMG versions of the German equivalents with similar wheelbases. However, he said the automaker might leave “a small performance gap” between the Model 3 and the Model 3 lineup.
He expects a range of more than 200 miles, of course depending on the size of the battery. The Morgan Stanley analyst also “a class-leading range of autonomous features” with more coming through over-the-air software updates in the future.
Still looking for fundamentals
UBS analyst Colin Langan, who has a Sell rating and $140 per share price target on Tesla Motors, noted that the automaker’s stock has climbed by nearly 60% since the fourth quarter earnings surprise. He thinks most of the run-up is due to the announcement about the asset-backed lease drawdown, which has enabled the automaker to handle its liquidity problems for now. He also said that excitement around the Model 3 reveal and the recent increase in gas prices have helped bolster investor sentiment, although he adds that the fundamentals don’t support the sudden surge in the stock price.
Langan warns that the list of competitors for the Model 3 is getting longer and longer, and he thinks this week’s reveal could be a negative catalyst because of high expectations and all the new competitors. On the other hand, he said if the mass market car is “too exciting,” it could cannibalize sales of the more expensive Model S.
Tesla Motors shares closed down 0.06% at $239.13 on Tuesday.
