Tesla Could Be Behind Schedule On Model 3 Production: Analyst

Tesla Inc. could be short of its Model 3 production goals, but any stock weakness is an opportunity for investors to buy shares, analysts at Baird said in a note Friday.

“We speculate (Tesla) may be behind on the Model 3 ramp,” potentially reporting 300 to 400 vehicles delivered against expectations around 500, “although we would be aggressive buyers on any (share) weakness,” the analysts said.

Tesla  is likely to report third-quarter deliveries this week. Unlike other car makers, the Silicon Valley company does not report monthly sales, and the quarterly delivery numbers are a closely watched proxy for sales.

Third-quarter deliveries will show at least a smattering of Model 3 sedans, the all-electric sedan aimed at the masses unveiled in July. Tesla has said it would begin to scale up Model 3 production in the fourth quarter.

“We believe Q3 will be the most challenging part of the Model 3 production ramp, and although we model 500 Model 3 deliveries, we think (Tesla) may be several weeks behind and likely missed” its third-quarter target of about 1,500 Model 3 sedans produced, the analysts said.

Even considering that Tesla shares have gained more than 60% so far this year, “we would be “buyers on weakness caused by a minor delay in the production ramp,” they said.

Analysts polled by FactSet expect Tesla to report deliveries of 26,000 vehicles. The Baird analysts are a bit more optimistic about the numbers, calling for the delivery of 15,100 Model S sedans, 10,800 Model X SUVs, and the 500 Model 3 deliveries.

Tesla has battled a wave of negative sentiment on the stock in the past two weeks, and the shares are poised to end the week down more than 2% on a second straight week of losses.

Shares closed at a record $385 on Sept. 18. Negative news stories included Chief Executive Elon Musk’s announcement that the Tesla semi truck would be unveiled in October, rather than September, and a couple of cautious analyst notes.

The previous stretch of sharp, two-week losses for the stock occurred when the company reported disappointing second-quarter delivery numbers.

Tesla reported then it had delivered just over 12,000 Model S sedans and more than 10,000 Model X SUVs; analysts had expected second-quarter deliveries of about 24,000 vehicles.

Next week, analysts will also be looking at the numbers for any cues around demand for the Model S and the Model X amid concerns the Model 3 might dent demand for Tesla’s pricier vehicles.

Tesla shares have gained 60% so far this year compared with gains around 12% for the S&P 500 index. That outperformance fades in the past three months, however, with Tesla down more than 5% versus a rise of nearly 4% for the S&P.