A second team of analysts now says that Tesla Inc. is likely to raise equity or debt this year and face production delays with its Model 3, although the Silicon Valley automaker claims the opposite on both counts.
Bernstein analysts said they expect "production delays and the specter of a capital increase to dominate investors' attention on Tesla"
over the next two quarters. Further delays in Model 3 would not necessarily cause "Tesla" to break, they said, but they would increase the company's cash usage.
Another capital increase seems likely, provided Tesla is unable to "materially" curb capital spending in the short term, they said.
Over the next two quarters, investors are likely to focus on the gross margins of Model 3 and the quality of mass-market sedans, the analysts said. "We remain skeptical on both fronts."
Related: Tesla's stock will fall 36%, says Goldman Sachs
The Bernstein analysts kept the stock neutral and neutral their price target is $ 265, up from Tuesday's price represents a decline of 9%.
Earlier this month, analysts at Goldman Sachs said in a statement that the automaker in Silicon Valley needs to tap into the capital markets this year. The Goldman analysts then lowered their price target for Tesla shares from $ 205 to $ 1
On the positive side, the Bernstein analysts said they had "long believed that Tesla can actually carry on the Model 3, then the company will be sizeable due to the rapid growth of the electric vehicle market and a lack of current competition at the price of the Model 3
Amber earlier this month has voiced doubts about the number of owners of the Model 3 who had in fact decided to proceed with their purchases when it was their turn to choose a car. To reserve a Model 3, customers must pay a $ 1,000 security deposit.
See also: More than 70% of Tesla's biggest fans did not buy a Model 3 when it was offered. Tuesday's note came from a joint conference call with investors and amber analyst Toni Sacconaghi, who is based in the US and covers Tesla and major tech companies, and Max Warburton, who is based in the UK and covers European automotive companies.
Production of the Model 3, the cornerstone of Tesla's expansion plans, was marred by delays and a series of shifts in his milestones. Tesla over the weekend halted the car's production a second time this year, a move the company called "planned downtime" to improve production.
Tesla in early April reported that the production rate of Model 3 was still below its targets in the first quarter, but said that this year, given the pace of the quarter, no more money would be needed.
Here are some highlights of the Call conference, as referenced in the note.
& # 39; Hyper-Automation & # 39; Probably responsible for hiccup production
Many in the industry suspected that building Model 3, while having a new experience for Tesla, "would be pretty easy" for the company, Warburton said.
According to calculations by Bernstein, Tesla has spent about $ 2 billion on its $ 3 billion investment budget for 2017, worth $ 3.5 billion, for the Model 3 at its Fremont, California facility, an amount the analysts "overwhelm "call a second line in an existing factory.
This money seems to have been spent on hyper-automation at a time when many manufacturers are withdrawing from automation. Chief executive Elon Musk himself said in a TV interview last week that Tesla has "too many robots," he said.
Model 3 is probably still crafted
Tesla will likely have to finish Model 3 by hand, the automated systems "probably will not work" and cars will come "half-finished" from the end of the assembly line, "Warburton said.
"I think the overhaul levels in this plant need to be overwhelming, and I would be extremely worried about the quality of these vehicles when they ship," he said, citing the note
Can Tesla do it all in the Fremont? "Repair" work?
Given the size of Tesla's Fremont plant and the way Tesla constructed the Model 3 and built the assembly line, it will be extremely difficult to reorganize to build the car conventionally, "Warburton said. 19659002] Looking at Tesla's planned "Model Y" vehicle, which is expected to be a compact SUV, Tesla would be wiser to start a new platform, "a green field in an attempt to be happy for the third time , "
" Model S and X were too labor intensive. Model 3 is too capital intensive. Maybe the third time they could do the Model Y right. But I think Fremont will continue to fight this company, "he said.
Real competition still years away
Some good news: There is" very limited real competition to the Model 3 over the next two years, "said The Bernstein analysts say that a real competitor would be a car with a $ 35,000 to $ 50,000 price tag and a luxury nameplate, for example the Chevy Bolt may not be a competitor as it hits the price, but not by a luxury car manufacturer.
"As a result, we see a fairly clear margin for the Model 3. The earliest arriving competitor will likely be the Mercedes-Benz EQ by the end of 2019," said Sacconaghi, according to the announcement.
On Capital Increase and Margins
Recent Comments by Firms that do not require raising equity or debt should be "taken with a grain of money," especially since Tesla's capital requirements are historically low h underestimated, Sacconaghi said.
In the medium term, investors are likely to focus on the gross margins of Model 3 and the quality of the sedan. These two points "will ultimately decide the debate between bulls and bears," said Sacconaghi.
Tesla has long been aiming for a gross margin of 30% overall, but remains below that target. The Bernstein analysts said they remain "worried and skeptical" about the company's margins.
As for the quality of the Model 3, problems in this area would further impact Tesla's service capacity and undermine the Tesla brand. However, Tesla may have time and consumption habits on its side: "We're bullish on electric vehicles in the longer term, so if Tesla could run Model 3, it has plenty of room to run," the Bernstein analysts said
have Tesla shares 4% in the last 12 months and 7% this year. This compares to 15% and 1.2% gains for the S & P 500 Index
SPX, + 0.95%
and advances of 20% and 0.3% for the Dow Jones Industrial Average.
DJIA, + 0.74%