The Tesla Model 3 was finally unveiled last night, but even before the unveiling, there were reports that demand was extremely high. Management revealed the initial number of preorders they received even before the unveiling, and some Tesla bulls are saying that demand was even higher than they expected, while some bears are being forced to admit that it’s quite strong.

Model 3 Sends Tesla Motors Inc Shares Higher

“Awestruck” by Tesla Model 3 demand

Tesla won’t even begin or delivering any Model 3 cars until toward the end of next year, but people are eagerly putting down the $1,000 deposit to reserve their cars. The price of the car starts out at $135,000, and it will have a range of at least 215 miles. Other features like autopilot hardware will also be included.

Stifel analyst James Albertine, who has a Buy rating and $325 per share price target on Tesla Motors, said he was “awestruck by the demand surfacing for the Model 3.” He noted that he previously disagreed with traditional automakers’ comments from 2008 and 2009 in which they questioned whether there was any demand for electric vehicles, he didn’t think Tesla Model 3 reservations would be so strong so quickly.

He added that he and his team are disappointed after visiting several Tesla stores to see the long lines first-hand, they waited to see what online preorders, which started late last night, would look like. Reported preorder numbers range from more than $115,000 to more than $150,000.

Concerns shift to production of the Tesla Model 3

Now that the initial excitement about the Tesla Model 3 is past, the Stifel team is shifting focus to production. Tesla is already facing production challenges and the mass market car isn’t even in production yet, and they said it will require a new high volume manufacturing line. Further, they don’t know whether the car will use more steel than aluminum or what battery costs will look like when production begins. Battery costs are a key component of Tesla’s gross margins.

Even with their $325 price target, they’re predicting that the automaker only produces 200,000 cars per year in 2020, while management guided for 500,000.

Bears warn that few catalysts are ahead

UBS analyst Colin Langan, who has a Sell rating and $140 per share price on Tesla, warns investors that once the excitement about the Tesla Model 3 is past, he doesn’t see any catalysts. Today the stock climbed by more than 5% to reach as high as $241.77 per share, and it’s been on a massive tear since the automaker’s last earnings report in February.

Now that the Tesla Model 3 has been unveiled, however, Langan notes that investors will shift their attention back to earnings per share and cash flow. He adds that this year’s earnings rely on the Model S and the ramp of the Model X, and a big implication for this is that the much less expensive Model 3 might cannibalize Model S demand. Further, cash flow will be impacted as Tesla plans to double the number of current Supercharger and store locations over the next year.