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Tesla pushes higher as investors see confidence in ability to scale Model 3 production

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Tesla shares (NASDAQ:TSLA) have continued to rise, rallying as high as 3.96% and trading at $372.68 per share on Monday’s intraday amid investors’ improved sentiment on the Elon Musk-led company’s capability to scale Model 3 production and a new, optimistic outlook from Wall Street analysts.

Tesla stock has seen a meteoric rise since the company held its 2018 Annual Shareholder Meeting. Since then, Tesla’s shares had shot to levels that have not been seen since September 2017 — the month when Tesla reached its all-time high of $385.00 per share. As of writing, Tesla stock has risen 17.78% year-to-date, beating the S&P 500, which has gained 3.3% year-to-date so far. Tesla shorts have taken a beating as well, with short-sellers losing over $2 billion in  mark-to-market losses as of last Wednesday. 

Part of the improvement in investor sentiment lies in the fact that since the second quarter began, Tesla started making real progress with its capability to scale the production of the Model 3. The Model 3 has been haunting Tesla for almost a year now, with the vehicle’s production numbers always falling below the company’s target every quarter. At the end of Q1 2018, however, Tesla was only a few hundred Model 3 short from its goal. Since then, CEO Elon Musk and the Tesla team have buckled down to overcome the compact electric car’s bottlenecks in both Fremont and at Gigafactory 1. 

After production shutdowns that made way for more robots to build even more cars, a restructuring that got rid of redundancies in its operations, the opening of orders for the Model 3 Performance and Dual Motor AWD, as well as the completion of another Model 3 assembly line in three weeks, Tesla finally seems to be in its element with the compact electric car’s manufacturing. With Musk’s tweet last Saturday featuring the first Model 3 Performance Dual Motor being rolled off an assembly line at a tent outside the main Fremont factory, it was evident that Tesla has a clear plan to scale the production of the compact electric car to 5,000 a week before the end of the second quarter. 

The first Model 3 Performance Dual Motor rolls off the assembly line. [Credit: Elon Musk/Twitter]

In a note to clients on Monday, Instinet analysts wrote that Tesla would likely hit a production rate of 5,000 Model 3 per week by the end of Q2 2018. The analysts, led by Romit Shah, stated, however, that Tesla might not be able to attain a sustained production output until some point in Q3 2018. Nevertheless, Shah expects Tesla to hit Elon Musk’s goal of achieving profitability at some point in Q3 2018 or Q4 2018.

“We see continued, meaningful progress on Model 3 production alongside our expectation for improved gross margins. This should offer Tesla a chance to achieve its financial targets in 2H18 (such as cash flow positivity and GAAP profitability),” the analysts wrote.

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As of writing, Tesla shares are trading up 2.89% at $368.53 per share.

Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.

Simon is an experienced automotive reporter with a passion for electric cars and clean energy. Fascinated by the world envisioned by Elon Musk, he hopes to make it to Mars (at least as a tourist) someday. For stories or tips--or even to just say a simple hello--send a message to his email, simon@teslarati.com or his handle on X, @ResidentSponge.

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Investor's Corner

Tesla enters new stability phase, firm upgrades and adjusts outlook

Dmitriy Pozdnyakov of Freedom Capital upgraded his outlook on Tesla shares from “Sell” to “Hold” on Wednesday, and increased the price target from $338 to $406.

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Credit: Tesla China

Tesla is entering a new phase of stability in terms of vehicle deliveries, one firm wrote in a new note during the final week of October, backing its position with an upgrade and price target increase on the stock.

Dmitriy Pozdnyakov of Freedom Capital upgraded his outlook on Tesla shares from “Sell” to “Hold” on Wednesday, and increased the price target from $338 to $406.

While most firms are interested in highlighting Tesla’s future growth, which will be catalyzed mostly by the advent of self-driving vehicles, autonomy, and the company’s all-in mentality on AI and robotics, Pozdnyakov is solely focusing on vehicle deliveries.

The analyst wrote in a note to investors that he believes Tesla’s updated vehicle lineup, which includes its new affordable “Standard” trims of the Model 3 and Model Y, is going to stabilize the company’s delivery volumes and return the company to annual growth.

Tesla launches two new affordable models with ‘Standard’ Model 3, Y offerings

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Tesla launched the new affordable Model 3 and Model Y “Standard” trims on October 7, which introduced two stripped-down, less premium versions of the all-electric sedan and crossover.

They are both priced at under $40,000, with the Model 3 at $37,990 and the Model Y at $39,990, and while these prices may not necessarily be what consumers were expecting, they are well under what Kelley Blue Book said was the average new car transaction price for September, which swelled above $50,000.

Despite the rollout of these two new models, it is interesting to hear that a Wall Street firm would think that Tesla is going to return to more stable delivery figures and potentially enter a new growth phase.

Many Wall Street firms have been more focused on AI, Robotics, and Tesla’s self-driving project, which are the more prevalent things that will drive investor growth over the next few years.

Wedbush’s Dan Ives, for example, tends to focus on the company’s prowess in AI and self-driving. However, he did touch on vehicle deliveries in the coming years in a recent note.

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Ives said in a note on October 2:

“While EV demand is expected to fall with the EV tax credit expiration, this was a great bounce-back quarter for TSLA to lay the groundwork for deliveries moving forward, but there is still work to do to gain further ground from a delivery perspective.”

Tesla has some things to figure out before it can truly consider guaranteed stability from a delivery standpoint. Initially, the next two quarters will be a crucial way to determine demand without the $7,500 EV tax credit. It will also begin to figure out if its new affordable models are attractive enough at their current price point to win over consumers.

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Investor's Corner

Bank of America raises Tesla PT to $471, citing Robotaxi and Optimus potential

The firm also kept a Neutral rating on the electric vehicle maker, citing strong progress in autonomy and robotics.

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Credit: Tesla

Bank of America has raised its Tesla (NASDAQ:TSLA) price target by 38% to $471, up from $341 per share.

The firm also kept a Neutral rating on the electric vehicle maker, citing strong progress in autonomy and robotics.

Robotaxi and Optimus momentum

Bank of America analyst Federico Merendi noted that the firm’s price target increase reflects Tesla’s growing potential in its Robotaxi and Optimus programs, among other factors. BofA’s updated valuation is based on a sum-of-the-parts (SOTP) model extending through 2040, which shows the Robotaxi platform accounting for 45% of total value. The model also shows Tesla’s humanoid robot Optimus contributing 19%, and Full Self-Driving (FSD) and the Energy segment adding 17% and 6% respectively.

“Overall, we find that TSLA’s core automotive business represents around 12% of the total value while robotaxi is 45%, FSD is 17%, Energy Generation & Storage is around 6% and Optimus is 19%,” the Bank of America analyst noted.

Still a Neutral rating

Despite recognizing long-term potential in AI-driven verticals, Merendi’s team maintained a Neutral rating, suggesting that much of the optimism is already priced into Tesla’s valuation. 

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“Our PO revision is driven by a lower cost of equity capital, better Robotaxi progress, and a higher valuation for Optimus to account for the potential entrance into international markets,” the analyst stated.

Interestingly enough, Tesla’s core automotive business, which contributes the lion’s share of the company’s operations today, represents just 12% of total value in BofA’s model.

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Tesla analyst: ‘near zero chance’ Elon Musk’s $1T comp package is rejected

“There is a near-zero chance that $TSLA shareholders will vote down Elon’s new proposed comp plan at the Nov 6 shareholders’ meeting.”

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tesla elon musk

A Tesla analyst says there is “zero chance” that CEO Elon Musk’s new compensation package is rejected, a testament to the loyalty and belief many shareholders and investors have in the frontman.

Tesla investors will vote on November 6 at the annual Shareholder Meeting to approve a new compensation package for Musk, revealed by the company’s Board of Directors earlier this month.

The package, if approved, would give Musk the opportunity to earn $1 trillion in stock, an ownership concentration of over 27 percent (a major request of Musk’s), and a solidified future at the company.

The Tesla Community on X, the social media platform Musk bought in 2023, is overwhelmingly in favor of the pay package, though a handful of skeptics remain.

Nevertheless, the big pulls of this vote are held by proxy firms and other large-scale investors. Two of them, Institutional Shareholder Services (ISS) and Glass Lewis, said they would be voting against Musk’s proposed compensation plan.

Tesla CEO Elon Musk’s $1 trillion pay package hits first adversity from proxy firm

Today, the State Board of Administration of Florida (SBA) said it would vote in favor of Musk’s newly-proposed pay day, making it the first large-scale shareholder to announce it would support the CEO’s pay.

One analyst said that Musk’s payday is inevitable. Gary Black of the Future Fund said today there is a “near-zero chance” that shareholders will allow Musk’s pay package to be rejected:

There is a near-zero chance that $TSLA shareholders will vote down Elon’s new proposed comp plan at the Nov 6 shareholders’ meeting.”

He added an alternative perspective from Wedbush’s Dan Ives, who said that he had a better chance of starting for the New York Yankees than the comp package not being approved.

Black’s the Future Fund sold its Tesla holdings earlier this year. He explained that the firm believed the company’s valuation was too disconnected from fundamentals, citing the P/E ratio of 188x and declining earnings estimates.

The firm maintained its $310 price target, and shares were trading at $356.90 that day.

Shares closed at $452.42 today.

The latest predictions from betting platform Kalshi have shown Musk’s comp package has a 94 percent chance of being approved:

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