Analysts Worried After Tesla Motors (TSLA) Gigafactory Tour


Tesla Motors Inc (NASDAQ:TSLA) has begun producing battery cells at the Gigafactory outside Reno, Nevada. The Wall Street, however, is feeling a mix of worry and praise for the automaker, sending the stock lower on Thursday, says a Market Watch report. Earlier this week, the EV firm hosted a tour and a Q&A session for analysts with Elon Musk.

Gigafactory tour should comfort Tesla investors

Musk touched briefly on the mass-market affordable Model 3 and Tesla’s prospects in relation to the new Trump administration.

As per the Morgan Stanley analysts – known to be bullish on the automaker, the Gigafactory tour made the “dream tangible for providers of capital.” The analysts said that even the shortest glimpse into the battery factory is meant to hike up the understanding of investors, and eventually reduce the cost of capital of the automaker.

Tesla Motors Inc (NASDAQ:TSLA) has said that the first battery cells to be produced at the Nevada factory will be used in the Model 3 and in Tesla’s energy-storage products by Q2. The Model 3 is expected to cost around $35,000 or around half the price of a Model S. The Model 3 is crucial for Tesla’s plan to become a mass-market producer, and turn consistently profitable.

As per Morgan Stanley analysts, Musk told the analysts that the automaker feels good about the pace of progress of the factory with Model 3 components. More specific Model 3 announcements, as per Musk, will be made later. Talking of Trump’s presidency, Musk said the president-elect has an emphasis on US manufacturing, and Tesla also shares the same goal.

Tesla Motors Inc (TSLA) Gigafactory

Morgan Stanley has a $242 price target on Tesla.

Why are the analysts concerned?

Goldman Sachs, however, expressed their concerns about the lack of details by Tesla Motors Inc (NASDAQ:TSLA) in relation to expectation of production ramp and the capital requirements. Even in the past, analysts at Goldman Sachs have been more critical of the EV firm.

“Tesla was confident it ‘could sell every Model 3 that it makes’ (and) continued to focus on manufacturing gains that it believes it can achieve by ’making the machine that makes the machine,’ but details on timing, capex requirements, and vehicle cost reductions remain sparse,” the analysts noted. Goldman Sachs has a $190 price target on the stock.

Analysts at Cowen were concerned that the Model S segment may be “showing signs of saturation as quarterly sales figures have been erratic.” And, the segment that Model S and the Model 3 caters to will begin to see more competition in late 2017 and beyond, the analysts noted. Cowen analysts are also concerned “about the Model 3 ramp, SolarCity execution, cash needs in 2017 and 2018 as the Model 3 ramps and potentially Gigafactories 2 and 3 are built in Europe and China.”

On Thursday, Tesla shares closed down 0.11% at $226.75.


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