TSLA Stock: Can Tesla Prove the Skeptics Wrong?

We’re pretty sure they don’t enjoy being known for this particular attribute. But, they can’t do anything about it because quarterly reports have shown it to be true (up until this point) — Tesla Motors Inc (NASDAQ:TSLA) is known for missing its target delivery schedules. They did it with Model X. And it looks like they’re doing it again, this time, with their upcoming Model 3.

Tesla has been saying that they are aiming for a manufacturing capacity of 500,000 vehicles by 2020. Some months back, they announced a bolder objective — instead of 2020, they are aiming to realize their target manufacturing capacity two years earlier, that’s 2018. Maybe the company is showing too much optimism. And that’s not really so bad. The problem is, it will be hard to believe such projection when their promise to start Model 3 production by 2017 looks like it’s going to be delayed. And sadly, that’s more Tesla-like — delayed rather than advanced delivery.

In a research note entitled ‘Tesla Mission 2017: Funding the Model 3’ (obtained thru Electrek), Morgan Stanley (NYSE:MS) auto analyst Adam Jonas — one of Tesla’s long-time supporters — says that Model 3 will only be commercially available by late fiscal year 2018, instead  of the 2017 target date. He adds that though many questions about the Model 3 will be addressed in 2017, some will remain unanswered. He’s also saying that as Tesla will aim to put cost, quality, performance and safety above everything else, they will be relying more on third party suppliers. Consequently, this will further put their target delivery date beyond their control.

And what about funding? During the last Tesla earnings call, CEO Elon Musk stated that there was no need for them to raise capital to fund Model 3 and some of their other projects since according to Musk, the Model 3 will actually be used to raise funds to compensate for their capital shortage. In Jonas’ earning model, however, the Palo Alto, Calif.-based company will be facing cash shortage by 2018.

In spite of the apparent delay in production and availability of the Model 3, it would seem that buyers will not mind too much and are willing to wait for Tesla to make the Model 3 into what the company is envisioning it to be.

But what exactly do we know about the Model 3 so far? It’s supposed to be Tesla’s least expensive electric car, a sedan that’s initially targeted for the masses. It will be easy enough to build that it can be mass produced by a major car maker without much difficulty. More importantly, Tesla says they plan to deliver around 100,000 Model 3 units before 2018. The question is — can they really do it?

Jonas, who reduced his price target on Tesla stock from $245 to $242 with an ‘Equal-weight’ rating, believes otherwise. And because many of his forecasts have turned out to be correct, it’s hard not to take this latest one seriously. So if he turns out to be right, it means many of the 400,000 customers who have made reservations for their Model 3 vehicle might not get their hands on their car until 2021. And that will be truly disappointing.

But then, Tesla has also been showing improved efficiency at what they do. So who’s to say they can’t meet their deadline this time? We might all be surprised yet. And we’re pretty sure Jonas wouldn’t mind being wrong about this one.

Tesla stock was last trading Wednesday at $198.62, down 0.24% from Tuesday and well off its $269 and change April high. Shares are down 8.7% year-over-year and 18% since Jan. 1.

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