Buy Tesla (TSLA) Ahead of Forthcoming Model X Ramp - Credit Suisse
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Credit Suisse analyst Dan Galves reiterated an Outperform rating and $325 price target on Tesla Motors (NASDAQ: TSLA), saying the Model X ramp is only a matter of time and they are bullish ahead of Wednesday's earnings report. The firm made no changes to their 2016 estimates while 2017 estimates were trimmed modestly.
"We remain bullish on TSLA, with high conviction on a 12-month view and also constructive in front of Wednesday's print," Galves said. "There are understandable reasons why TSLA has sold off recently…risk-off / global macro concerns, negative sentiment on auto stocks, and declining oil prices. But we see the concern on Model X production ramp / volumes, the subject of several recent bearish notes, as overdone at this point."
The analyst said he doesn't understand the repeated under-estimation of Tesla's ability to deliver, and see this as an opportunity similar to past concerns over Model S ramp.
While the company is behind where they wanted to be on X they still see 500 units of production in Q4 and continued deliveries (albeit slow) in Jan / Feb as signalling that there are no fundamental buildability issues.
"We believe that several minor but unacceptable quality issues existed on early production…the company slowed down the line to tweak the production process (fit / finish and trim issues appear to be fully fixed) and, in some cases, to wait for re-designed parts," the analyst commented. "According to mgmt., the production process is quite dialed-in right now, there are no critical unresolved design issues, and once re-designed parts are available, the ramp should progress quickly. Meanwhile, Model S production continues to run at very high levels."
Shares of Tesla Motors closed at $162.60 yesterday.
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