On October 31st, UBS expressed concerns over Tesla's ongoing challenges with the Model 3 production, suggesting that the issues signal underlying instability. The firm maintained its "sell" rating for electric vehicle stocks, emphasizing that Tesla's Model 3 production is still not on track. This comes as investors remain cautious about the company’s ability to meet expectations.
In the third quarter, Tesla delivered a total of 26,150 electric vehicles, including just 220 Model 3 units, which fell short of FactSet's estimates of 25,860 and 1,260, respectively. Two months prior, Tesla had projected producing 1,500 Model 3s in the quarter. UBS analyst Colin Langan highlighted in a client report that the Model 3's performance could damage the company's credibility and increase near-term risks. He noted that Tesla faces several fundamental challenges, including the profitability of the Model 3, the stability of its energy storage and solar businesses, and the potential need for additional capital.
Tesla’s stock dipped slightly on Monday morning, despite a 50% rise this year. As of last Friday, the S&P 500 had gained 15%. Rankan, an analyst at UBS, reaffirmed his 12-month target price for Tesla at $185, which is 42% below the closing price from the previous week. He also revised his earnings outlook downward, citing the slow progress in Model 3 production as the main reason.
Rankan now expects Tesla to report a loss of $6.40 per share in 2017, up from his earlier forecast of $5.30 for 2018 and $3.30 for 2019. This is significantly higher than his previous estimate of $1.60. In his report, he stated that with limited profitability from the Model 3, expanding infrastructure needs, and the upcoming launch of the Model Y in late 2019, Tesla may eventually require external financial support. With luxury automakers set to introduce competing electric models between 2018 and 2020, demand for EVs is expected to grow. However, Tesla has yet to respond to requests for comment.
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