Model 3 demand, production, and margin
"We believe Model 3 demand, production, and margin are the primary drivers of stock performance in 2019," Oppenheimer analyst Colin Rusch said in a note out Monday.
According to Rusch, the bull case is that annual Model 3 demand reaches 500,000 vehicles and that Tesla is able to begin delivering volumes at that run-rate. The bear case, however, is that Model 3 demand fails to reach 350,000 vehicles a year and production is slower than expected.
Tesla has recently made several big decisions around its Model 3 production.
"We expect Tesla to continue pushing lower end Model S interest toward higher end Model 3 configurations to maximize margin dollars," Rusch said. "We remain underwhelmed by competitive products and believe Tesla is evolving faster than competitors."
Debt repayment and capital expenditure for US/China capacity
"With the groundbreaking done on its China facility and its indication that capacity would be debt financed, we believe investors are looking for specifics on debt structure, carrying cost for the debt, and timing for positive cash flow," Rusch said.
"We believe this market is critical for Tesla's growth as 8.8% of Chinas light-duty vehicles were plug-ins during December 2018," Rusch added.
Update on product roadmap and timing beyond Model 3
Besides information around the Model 3, future product updates such as the next new vehicle, the Model Y SUV crossover, is also an area that may spark near-term investor interest, Rusch says.
In December, i nternal documents seen by Business Insider revealed that Tesla had plans to build the Model Y SUV crossover at its Nevada Gigafactory and its factory in China, and that the two factories will ramp up their Model Y production lines to 7,000 and 5,000 vehicles, respectively, by early 2021. A Tesla representative told Business Insider that the timeline and information in the documents were "outdated," but did not specify any further.
Tesla's "priority list is Model Y, solar roof tiles, pickup, semi, Roadster," Musk tweeted in November.
"We would not be surprised to see TSLA provide an update on its product roadmap in part to help support the stock," Rusch said.
Rusch is expecting adjusted earnings of $2.85 a share on revenue of $7.4 billion. Meanwhile, Wall Street analysts surveyed by Bloomberg were expecting adjusted earnings of $2.14 a share and revenue of $7.1 billion.
Rusch has a "buy" rating and $418 price target 62% above where shares were trading Monday.
Tesla was down 15% in the past year.
Now read:
