After missing its fourth-quarter Model 3 delivery target badly, Tesla Inc (Nasdaq: TSLA) will have yet another chance to prove to critics that it has gotten Model 3 production back on track when it reports delivery numbers for the first quarter within the next week or so.
Expectations for Tesla have fallen along with the company’s stock in the past month, but some analysts say low expectations are a good thing.
[See: The 10 Most Valuable Auto Companies in the World.]
Baird analyst Ben Kallo is among the analysts who have lowered their first-quarter expectations for Tesla deliveries. Kallo is now expecting Tesla to report 10,000 Model S deliveries, 10,000 Model X deliveries and 8,000 Model 3 deliveries. Kallo had previously called for 12,250 Model S deliveries, 12,000 Model X deliveries and 10,000 Model 3 deliveries. Kallo has also lowered his full-year 2018 Model 3 delivery estimate from 151,250 to 126,000.
But with Tesla stock down 13.6 percent in the past month, Kallo says the first-quarter numbers are more likely to be a positive catalyst for the stock than a negative one.
“We like the set-up headed into Q1 deliveries as we believe sentiment is overly negative and think TSLA may be able to exceed lower expectations,” Kallo says.
Tesla has set it will be producing 5,000 Model 3s per week by the end of the second quarter. Kallo estimates Tesla will reach 2,500 vehicles per week within weeks.
“Pessimism around the delayed Model 3 ramp and quality concerns (which we believe are overblown) has pressured the stock in recent weeks, and sentiment is extremely negative headed into deliveries.”
In March, CNBC reported that current and former Tesla employees have said the company is producing a “high ratio of flawed parts” that must be repaired. Tesla downplayed the issues, saying the the majority of the flaws are “extremely minor” and fixed within minutes.
After speaking with representatives from 25 different Tesla sales centers, KeyBanc analyst Brad Erickson said earlier this month that Model 3 quality issues “seem to be subsiding” compared to his last round of checks in early February.
[See: 7 Auto Stocks to Drive Income.]
However, Erickson says longer-term Tesla expectations remain unrealistically high.
“Longer-term share gains necessary to support the stock still appear overly ambitious, and ultimately we believe the company’s profitable growth will likely not live up to investor expectations,” Erickson says.
KeyBanc has a “sector perform” rating for Tesla. Baird has an “outperform” rating and $411 target for TSLA stock.
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Tesla Inc (TSLA) Investors Brace For First Quarter Delivery Numbers originally appeared on usnews.com
