Tesla Inc (NASDAQ:TSLA) stock skidded slightly right the company revealed another disappointment on Model 3 deliveries on Thursday. However, the stock rallied on Friday after erasing the brief decline on Thursday, proving just how resilient it is. Investors have likely gotten used to such disappointments, and that could be bad for Tesla stock short-sellers if/ when the disappointments finally do evaporate and the company does get the Model 3 on track.
As is generally the case, analysts are just as split as ever on Tesla stock following the latest deliveries report.
Here’s what Tesla stock bears have to say about the disappointment
While last year was widely seen as the year of the Model 3, this year is shaping up to be “part deux” of the year of the Model 3, which is likely to affect the timing of his so-called “masterplan.” Barclays analyst Brian Johnson has been firmly in the bear camp on Tesla stock for quite some time with his Underweight rating and $210 price target.
He began this week’s note with a jab at the bitcoin crowd by saying that last year for Tesla was the “Year of the Model 3” and that this year is turning out to be the “Year of the Model 3, Part 2,” unless Tesla makes a move into blockchain or Bitcoin.” Many small firms tapped into the bitcoin insanity by changing their names and switching industries.
Johnson warned that, contrary to what Tesla stock bulls say, production delays could become even more of a problem. He explained that this week’s press release marks the third time in only 20 months that the EV maker strayed from “formal targets.” He added that if the Model 3 is eventually seen in a positive light by consumers, then all the delays won’t ultimately mean anything.
When will Tesla raise capital again?
On the other hand, if the delays persist, then Tesla’s credibility could take a hit, which will affect its ability to access the credit markets. Further, a longer ramp increases the competitive risks and results in fewer Model 3 buyers being eligible for the all-important $7,500 federal tax credit on their purchases.
A longer ramp also means that Tesla could need more capital sooner rather than later. Johnson estimates that the EV maker will burn $4.2 billion in free cash flow this year, so he’s estimating that it will need to raise $2.5 billion. However, he clarified that the timing of the capital raise will depend on the length of the Model 3 ramp, noting that the company must be in a strong position before it will be able to raise funds. He expects the company to raise funds in the third quarter after the automaker has proven that it can manufacture 5,000 Model 3 cars per week, a milestone that has proven elusive so far.
Here’s what Tesla stock bulls have to say
Baird analyst Ben Kallo has an Outperform rating and ultra-bullish $411 price target on Tesla stock, and he sees a number of catalysts in the near future. He said he continues to like Tesla stock “at current levels,” although he’s one of a very short list of analysts who do.
Even though the automaker keeps delaying the Model 3 production ramp, he continues to believe it can do so. Looking on the bright side of the disappointing report, he said that the automaker now has improved visibility into the problems plaguing the Model 3 assembly line.
He feels demand for the Model 3 might accelerate as the first non-employee buyers to receive their cars offer positive reviews. In fact, he believes the total addressable market for the Model 3 might be even bigger than what Tesla stock bulls are expecting.
He also pointed out that bears remain skeptical of whether Tesla will be able to sell the Model 3 with gross margins that are as high as it says it can, but he thinks the automaker will be able to do it over the next three to four quarters.
Tesla stock ticked higher by as much as 0.47% to $316.10 in intraday trading on Friday.
