Tesla’s stock price (TSLA) is up over 3% following a new note by RBC analyst Joseph Spak to clients this morning. The analyst recently visited Tesla’s Fremont Factory and met with the management. He came out of the meeting with the impression that Tesla is confident that it can ramp up Model 3 production quickly, which is essential to the company short- to mid-term goals.
Here’s the note he issued after the meeting (via Barron’s):
Tesla seems to have made progress toward 2,000/week production run-rate. Model X production run-rate improved but still appears to have some challenges requiring a lot of man hours at final assembly. However, we believe Model S supply has improved (now has capacity of 1,500/week) which explains timing of 60kWh introduction. Tesla indicated plant was running close to 50/50 split of S/X, but by our count on the final assembly line (an admittedly limited sample size) we would put mix at closer to 60-65% Model S…
Tesla is confident they can ramp Model 3 quickly – a) technology will be relatively standard, b) paint capacity is already at 250k, and can go to 500k with limited capex, c) stamping needs modest investment. Incremental capex really going to Model 3 robotic line and final assembly line which needs to be built…
To that end, Tesla is essentially learning how to become a manufacturing company on the fly. While we don’t have meaningful reason to doubt Tesla can eventually get to their targets, doing so in a timely matter without some growing pains could prove challenging. Failure to hit near-term objectives may not impact the long-term view, but could hold back the stock or provide a more favorable risk/reward entry point
As usual, I would recommend taking analyst notes with a grain of salt. They are often successful in moving the stock price, but you always need to take things into perspective.
For example, Joseph Spak is ranked #2,761 out of 3,974 analysts on Tip Ranks with a 40% success rate and an average return of -0.9%.