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Tesla (TSLA) Scrambles to Restore Faith; Wedbush Remains Cautions

support@smarteranalyst.com (Ben Mahaney)

After losing 1/3rd of its market cap in the last six months, Tesla (TSLA) stock needs some good news to turn around the poor investor sentiment surrounding the company. As we head into the final week of the 2nd quarter, Tesla’s delivery number announcement could be the catalyst bulls desire, as the update is expected to arrive before Independence Day on July 4th. At a time when Tesla is considered by many to be stretched thin, its updated numbers could quiet the chatter about their weak Q1 earnings.

Tesla is currently building a Giga 3 factory in Shanghai, gearing up for its new Model Y production in 2020, increasing Model 3 production in the US, and battling to ensure it has the capital to continue to fund its expensive operations. This has Wedbush analyst Daniel Ives concerned that Tesla is “trying to juggle [too] many balls in the air at the same time,” causing him to maintain his Neutral rating on Tesla stock along with $230 price target.

Tesla set an aggressive target for its Q2 vehicle deliveries, projecting 90k-100k deliveries. Ives believes this target is unlikely to be reached, as he lowers his unit delivery projections from 88k to 84k units. In addition to unit deliveries, showing a path to sustained profitability will be crucial for Tesla to display in this quarter. Cost cutting measures have been put in place over recent months, but investors will want to see these steps positively impact the company’s bottom line earnings.

Above all, Ives wants to see if Tesla can hit its overall unit guidance for 2019, which is 360k-400k. Tesla in 2018 was a “demand story” according to Ives, but in 2019 he considers it a “production story.” Ives thinks that hitting its unit guidance for 2019 will be an “Everest-like task,” and he predicts that 350k is the closest they can get.

In Ives eyes, Tesla “has become ultimate ‘prove me’ stock,” and its Q2 delivery number needs to be strong in order to restore faith in the stock throughout Wall Street.

As far as the electric car's verdict on the Street, it is a toss-up among analysts, as TipRanks analytics exhibit TSLA as a Hold. Out of 25 analysts polled in the last 3 months, 9 analysts say Buy, 5 advise to Hold, and 11 have Sell ratings on the stock. With a return potential of nearly 23%, the stock’s consensus target price stands at $268.78.

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