Model 3 production delays and fears over fierce competition have Tesla Inc (Nasdaq: TSLA) investors limping into third-quarter earnings season.
But with Tesla stock down 6.8 percent in the past month, long-term investors may have a golden opportunity to load up on Tesla heading into what could be a pivotal 2018.
Earlier this month, Tesla reported that it produced just 260 Model 3s in September, less than 20 percent of the 1,500 vehicles it had targeted. Tesla previously said it will be producing 20,000 Model 3’s per month by December. The company blamed temporary production bottlenecks for the miss, but news of yet another Tesla production delay has investors on edge.
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To make matters worse, Deutsche Bank analyst Rod Lache recently said competitor General Motors Co. ( GM) may have taken the lead in the race to get fully autonomous vehicles to market.
“GM’s AVs will be ready for commercial deployment, without human drivers, much sooner than widely expected (within quarters, not years), and potentially years ahead of competitors,” Lache said in September.
Even with all the uncertainty surrounding Tesla’s business at the moment and the stock trading at a sky-high valuation, Baird analyst Ben Kallo says long-term investors should feel confident loading up on Tesla stock ahead of the company’s third-quarter earnings report on November.
According to Kallo, Tesla’s earnings are likely to disappoint the market. Baird is calling for an earnings per share loss of $2.78 on revenue of $2.87 billion. Consensus analyst estimates are calling for an EPS loss of $2.28 on $2.94 billion in revenue.
Although a large earnings miss may result in some short-term volatility in Tesla stock, Kallo says the Model 3 production delays are just a bump in the road.
“We believe the Model 3 ramp is one to two months behind schedule, but are not concerned as TSLA successfully ramped production of the Model S and Model X, which are more complicated vehicles, and we are confident TSLA will achieve its production targets over the intermediate term,” Kallo says.
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He says investors should only start to be concerned about Tesla’s ability to raise additional capital if the delays persist through April of 2018.
In the meantime, Kallo says the unveiling of the Tesla semi-truck on Nov. 16 could be a positive catalyst for the stock.
Baird has an “outperform” rating and $411 price target for Tesla.
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Tesla Inc (TSLA): Prepare For an Earnings Miss originally appeared on usnews.com
