Tesla Stock Forecast

Tesla Motors, which was trading as low as $141.05 on Tuesday, February 9th, began its bull run the next day after they released their fourth quarter results and future guidance. The numbers inspired investors enough to cause the stock to immediately jump by over 10% in pre-market trading alone. The most significant point from the earnings was Musk’s forecast that his company would become net cash flow positive for the year 2016, beginning in March, and that they will ultimately be profitable by the fourth quarter. Tesla has increased by over 50% since February 10th , to over $224 on March 17th as analysts and investors are gearing up for the unveiling of Tesla’s newest electric car, the Model 3 and are seeing more potential in the company’s ability to ramp up production.

Unveiling the Model 3

Prior to the earnings report that catalyzed Tesla’s major run, many Tesla bears were particularly concerned that the company would never be able to scale operations up to the point that they would actually be able to compete with the major auto manufacturers. Especially, as luxury car companies such as BMW have entered into the fully electric luxury car market, and have had very similar sales numbers with their I8 as Tesla has had with their Model S. Furthermore, it wasn’t just competition from the luxury market that worried Tesla bears, many believed (and still do believe) that Tesla’s mass market car, the Model 3 will be unable to compete with General Motors’ $35,000 Chevy Bolt. Nevertheless, Tesla has been pushing forward with their plans to release their $35,000, mass market vehicle, and the company has sent out invitiations for the official unveiling, which will take place March 31st.

(source: www.teslamotorsclub.com)

Tesla plans for the Model 3 to hit the streets in late 2017. Stifel analyst, James Albertine, said in March 14th note “The Model 3 is critical to Tesla’s ability to transition to niche to a higher-volume car maker” and Tesla’s stock price would indicate that investors have faith that the company is capable of making such a transition.

According to Bloomberg, the event will feature a drivable version of the Model 3, which also indicates that the company has progressed rapidly in the development of the car. Furthermore, a recent poll of over a thousand electric car enthusiasts given by Clean Technica, a website dedicated to green technology showed that people are very enthusiastic about the new Tesla, significantly more so than any other electric.

(source: www.cleantechnica.com)

Many investors were also concerned about the rollout of Tesla’s Model X, as the company only managed to deliver 200 models in the fourth quarter. However, Tesla CFO Jason Wheeler assured investors that they have learned valuable lessons and that things will be different with the rollout of the Model 3. Credit Suisse Analyst, Dan Galves, received the CFO’s message positively and wrote in a note to clients “Model 3 launch timing and ease of mass production is significantly more important than it was for the Model X. On the Model 3, management indicated that there is a clear focus on ease of build, on-time launch, and cost.”

Upgraded Factory

Furthermore, bears have been concerned about the fact that the company has been burning cash at an alarming rate; their cash reserve has fallen by $700 million since December 31st, and the company has burned $2.9 billion of cash in the past six quarters. The company also has $1.2 billion in cash, and $2.7 billion dollars of debt. However, in the month that has passed since Tesla reported their frightening cash figures, at least one analyst seems to believe Tesla’s financial health will be stable. On Wednesday February 16th, Oppenheimer & Co issued a note saying, “We believe those two operating metrics are critical benchmarks for the company as they progress toward sustainable growth. We remain bullish on shares given the recent update.” According to Tesla’s most recent information regarding capital expenditure, $1.6 billion has gone to towards upgrading their Fremont, California factory. Tesla’s $5 billion factory will be able to produce 50 gigawatt hours of battery packs a year, enough capacity to make Tesla’s goal of producing 500,000 cars a year by 2020 a reality.

Some analysts toured the updated factory, and sentiment regarding Tesla’s ability to deliver is overwhelmingly positive. Stifel analyst James Albertine wrote in his note “In roughly one year since our last visit the progress witnessed is truly stunning.” Some of the noted features of the upgraded factory include a new aluminum stamping press, which will be able to produce up to 20 times more aluminum bodies for the Model S and Model X, than the previous machines. The gigafactory also has a new state of the art paint shop as well as an updated robotic assembly line, capable of producing over 100,000 finished cars a year. In Albertine’s words “robotics systems are customized, production processes are revolutionary, and attention-to-detail/supply chain management is improving by the minute. We do not believe this production process is one competitors can easily recreate.”

Tesla’s battery production operation appear to be very successful, and it is believed that the company is able to develop car batteries at cost that is half that of the industry average. In a March 14th note, Robert W. Baird analyst, Ben Kallo, wrote in regards to Tesla’s battery production “This should allow Tesla to produce the Model 3 with healthy margins, and to invest in vehicle aesthetics and performance, placing it above competing vehicles.”

I Know First supplies financial services, mainly through stock forecasts via their predictive algorithm. The algorithm incorporates a 15-year database and utilizes it to predict the flow of money across 7,000 assets. The self-learning algorithm uses artificial intelligence, predictive models based on artificial neural networks, and genetic algorithms to predict money movements within various markets.

In the forecast from March 17th 2016, I Know First remained bullish on Tesla for the short and long term.