Tesla Inc (TSLA) stock is off and running out of the gate this morning after one perma-bull raised his price target for what he sees as the company’s biggest competitive advantage. He believes that the EV maker’s Supercharger infrastructure and Gigafactory combine to create that advantage: EV infrastructure.
However, another firm also weighed in on Tesla Inc (TSLA) stock this week, but its analysts seem to see production problems with the Model 3 as a concern that outweighs the EV maker’s advantages. In short, it appears that Morgan Stanley is pitted against Barclays in this latest round of the bulls versus the bears over Tesla stock.
Morgan Stanley analyst Adam Jonas has an Equal-weight rating on Tesla Inc (TSLA) stock, but he’s actually a perma-bull despite that rating. He boosted his price target from $317 to $379 in a note to investors on Tuesday, citing the automaker’s charging infrastructure.
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Tesla Inc (TSLA) aims to have about 10,000 Superchargers by the end of this year, although Jonas said the company had only 6,246 as of Aug. 17. It’s unclear how many Superchargers are under construction currently, but he actually expects there to be 15,000 “destination chargers” by the end of this year. In addition to those chargers, the automaker has 149 wholly-owned-and-operated service centers, 301 stores and galleries, and the Gigafactory in Reno. Jonas estimates that Tesla has allocated almost $8 billion to its manufacturing, servicing and charging infrastructure.
According to him, infrastructure is the greatest “elephant in the rom” when it comes to EVs. He feels that this issue will increase in importance dramatically in the next few years, especially since it could be “the single most important physical bottleneck preventing widespread EV adoption.”
Tesla Inc (TSLA) stock snapped its five-session winning streak on Monday after a handful of negative reports. The company admitted earlier this month that it was having some serious “production bottlenecks” with the Model 3. Tesla Inc (TSLA) said it delivered 26,150 vehicles during the third quarter, including only 220 Model 3 cars, while consensus was looking for 25,860 total deliveries, including 1,260 Model 3 cars.
Then on Friday after closing bell, The Wall Street Journal reported that Tesla Inc (TSLA) was building much of the Model 3 by hand rather than on the automated production line, citing people familiar with the problems. However, a spokesperson for the automaker told CNBC in a statement on Monday that the Journal’s report was “fundamentally wrong and misleading.”
Later on Friday, Tesla Inc (TSLA) CEO Elon Musk announced that they have delayed their semi-truck unveiling to Nov. 1 from Oct. 26 because of the production problems with the Model 3 and the potential project that would help restore power to Puerto Rico after the hurricane.
Barclays analysts warned in a note to investors on Monday that investors who aren’t a “true believer” in the automaker might start exiting Tesla stock due to the production problems with the Model 3. They also warned that those issues could rob the company of its “iPhone moment,” or the moment when “the world appreciates the revolutionary potential of the product.” According to the firm, some investors only own Tesla stock because of the possibility of an “iPhone moment” and not because they actually believe in the company.
Some forecasts predict that this so-called “iPhone moment” will finally arrive in the middle of next year, but Barclays analysts said that the Model 3 production problems could delay the Model 3’s production ramp into the second half of next year or even into 2019. This could give other automakers a chance to better compete with the Model 3. Barclays has an Underweight rating on Tesla stock.
Infrastructure is one issue both bulls and bears should consider when it comes to Tesla Inc (TSLA) stock, and it isn’t the amount of infrastructure that may necessarily be the concern. The automaker must have enough infrastructure to support the number of cars it has on the road, so if the Model 3 production ramp races ahead of infrastructure, buyers may become frustrated with the lack of infrastructure.
There have been reports in the past about Tesla Inc (TSLA) owners having to wait a long time to get their cars serviced, and some have been worried about long lines at the Superchargers. These issues will be exacerbated if the automaker hasn’t expanded its infrastructure enough to support another 400,000 Tesla vehicles in use, especially given that it uses its own proprietary charger rather than the standard EV charger that can be found at shopping centers across the U.S.
Ultimately, there will be a delicate balance between infrastructure and number of vehicles as EV adoption muddles along, and Tesla Inc (TSLA) is in the spotlight of it all.