As Tesla (NASDAQ:TSLA) approaches the release of its second-quarter earnings, some of the electric car maker’s supporters are taking a stand to express their support for the company. Among them is JMP Securities analyst Joseph Osha, who stated that Tesla’s financial position should improve after the first quarter, which saw the company getting hit by delivery challenges and a debt repayment.
Osha expressed his confidence in Tesla stock, stating that he expects the electric car maker to cap off the year with $3.5 billion in cash and equivalents, up from the roughly $2.2 billion at the end of the first quarter. “We think it is a mistake to look for further negative free cash flow unless operations weaken again,” Osha stated.
The JMP analyst also believes that Tesla will likely refinance a convertible issue coming due in November, instead of making a cash payment. “If our forecasts are correct, we believe that concerns regarding Tesla’s liquidity should ease,” Osha added.
Osha is among Tesla’s staunch supporters, keeping an “Outperform” rating on the stock and an optimistic price target of $347 per share. That’s about 27% above FactSet’s average of $273 per share.
Tom Choi of Third Square Capital, who holds a bullish stance on Tesla, recently published its long-term expectations for the company as well. Explaining his position, Choi noted that Tesla could hit $890 per share in 2-5 years, considering the company’s outstanding disruptive product portfolio, strong brand, competitive cost structure, and a minimal competitive risk thanks to other disrupted legacy competitors.
Addressing the idea of more experienced automakers eclipsing Tesla’s vehicles with their own, Choi noted that veteran carmakers would likely continue to struggle amidst the industry’s transition towards electrification. A prominent example of this is Volkswagen, whose CEO declared back in 2013 that the company will be the leader in electromobility by 2018. The German automaker has so far failed in this goal, with its first all-electric vehicle, the ID.3, only being unveiled this year.
Tesla, on the other hand, is aggressively growing, and it is being led by Elon Musk, a man who is deeply invested in the company. This, together with the electric car maker’s preference for vertical integration, will likely be a key difference-maker as the auto industry enters the electric age. Couple that with a full self-driving strategy that is founded on real-world data from an ever-growing fleet of vehicles, and Tesla seems poised to dominate in the years to come.
Tesla’s second-quarter earnings call is expected to be held on Wednesday, July 24, 2019 at 3:30 p.m. Pacific Time (6:30 p.m. Eastern Time).
As of writing, Tesla stock is trading +0.62% at $261.78 per share.
Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.