Tesla Investors Focus on Liquidity, Ignore Model 3 Production Miss

Tesla announced a production target of 5,000 Model 3 sedans per week by the end of this year's second quarter.

"The TP reduction is largely a reflection of the on-going delays to the ramp to reach c10k units a week and a time when Model 3 gross margins begin to normalize, with scale". For comparison, Telsa also produced 11,730 Model S cars and 10,070 Model X cars this spring, totaling nearly 30,000 vehicles.

"While it seems a flawless storm is weighing on the shares, we are buyers into pressure as Model 3 production ramps".

Tesla may have steered itself away from a financial precipice, after the U.S. electric carmaker announced that it had finally started to produce its Model 3 on a scale that could lead it to the mass market. The launch came with a forecast of production rates of 5,000 per week by now (and even "looks like we can reach 20,000 Model 3 cars per month in December" 2017), but in the words of Elon "production hell" ensued, with gremlins causing a fraught start-up of the highly-automated production line (including the battery module assembly line), and quality problems plaguing early output.

The electric-car maker missed its production targets in the first-quarter.

"We believe the backlog for Models S and X remains solid but that this is an area to monitor given the sequential declines".

Despite all the production hell and cash flow concerns in the first quarter, Tesla has announced plans to build a new truck and a roadster sports vehicle, and to build a factory in China.

Baird analyst Ben Kallo also maintained his Outperform rating on Tesla stocks.

"So if they're on track, even 2,500 units per week within the next few weeks or months still puts them relatively close to their initial guide and well on the way of being cash flow sufficient by means of the Model 3". The carmaker said it won't need to raise more funds this year by selling stock or issuing debt, which would help mitigate cash balance concerns.

"It has been extremely hard to pass the 2,000 cars per week rate for Model 3, but we are finally there".

Mr. Musk has been glorified by investors and the media as the one with all the answers: previous debt raises and equity issuances to fund Tesla, a company which has been churning through an wonderful amount of cash each year, have only sped up.

Yet there is a silver lining to Tesla's production rate miss. Tesla shares opened up as much as 6.9 percent and gained 2.2 percent to $258.11 as of 9:47 a.m., regaining some ground after a 22 percent slump in March.

  • Joe Gonzales