Can Tesla Bounce Back From Disastrous Model 3 Launch?

by Fredrick Graves November 3, 2017, 0:13
Can Tesla Bounce Back From Disastrous Model 3 Launch?

"The Tesla AI team, which is fundamental to achieving full autonomy, strengthened dramatically this year, with a number of the world's best AI engineers and researchers joining our company". We continue to make progress resolving early bottlenecks related to these issues, and there remain no fundamental problems with our supply chain or any of our production process. Analysts' consensus estimates suggest that Tesla might not report a quarterly profit until the second half of 2018.

Among investor worries: The Wall Street Journal reported on October 6, citing unnamed sources, that "as recently as early September major portions of the Model 3" were being built by hand. Munster sums up his view by calling Tesla "the biggest opportunity in tech over the next five years", per CNBC. According to the company's Q3 report, it has only managed to build 260 Model 3 vehicles, well below the 1,500 that had been planned by September. The shares were sold at an average price of $340.36, for a total transaction of $15,240,299.72.

Net cash used in operating activities amounted to $300.6 million in the third quarter compared with net cash provided of $423.6 million a year ago. It shelled out $1.42bn in the third quarter to upgrade its factories. Around that time, he adds, driverless cars should be gaining traction, and he expects Tesla to assume a leading position in this technology.

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"As expected, [Tesla] is two-to-three months behind schedule for the Model 3, and guided to weak [fourth quarter] gross margin given the Model 3 production ramp, which may pressure shares".

Tesla blamed production bottlenecks at its Gigafactory battery production facility, where Musk has been camping out with colleagues to put extra hours into fixing the problems. This indicates that production has not been as smooth as anticipated. Importantly, we believe Tesla has the talent to fix its manufacturing issues, and should hit its targets of several thousand Model 3s per week by [the end of 2017] and about 5k per week by the end of [the first quarter of 2018]. Tesla now has more than 400,000 advance reservations for the Model 3, but how long potential buyers will wait to take delivery is uncertain - all the more so UBS analysts wrote, because "competing EVs are coming, and a long delay could reduce (Tesla's) market share opportunity". However, the company intends sequentially cut down production of Model S and Model X by 10% in the fourth quarter in order to divert more resources toward the production of Model 3.

For the Model 3, the company's first mass-marketed vehicle, more than 450,000 people have preordered the auto. Even so, Musk declared confidence that production will reach 5,000 a week by "late in the first quarter, in March". Following the completion of the sale, the vice president now directly owns 1,736 shares of the company's stock, valued at approximately $589,354.64. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. "So these are nutty growth rates", he told investors.


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