While Wall Street doesn’t seem too optimistic on Tesla these days, one top Wall Street analyst has gone against the grain and predicted Tesla’s stock should rise after a ‘step-function up’ in revenue this quarter due to record deliveries.
The comment is coming from Nomura Instinet analyst Romit Shah, who is one of the highest-ranking analysts on Wall Street.
He wrote in a note to clients today:
“We expect improving fundamentals in Q3, consisting of a step-function up in revenue growth and positive operating leverage, driving shares higher. If Tesla can execute to plan, we believe that the narrative around bankruptcy risk will go away, thereby reducing short interest and driving the stock higher.”
Tesla is indeed on track with an important increase in deliveries during the quarter.
After a significant production ramp for the Model 3 at the end of the second quarter, Tesla confirmed a record number of vehicles in transit to be delivered in the third quarter: 11,166 Model 3 vehicles and 3,892 Model S and X vehicles.
Those vehicles are likely all already delivered and Tesla has continued producing about 7,000 vehicles per week since then, according to CEO Elon Musk.
According to Shah’s own look at the Model 3 supply chain, Tesla is ordering parts for 6,000 Model 3’s per week at the moment:
“Our supply chain checks in Taiwan and Korea indicate that Tesla is currently procuring Model 3 parts at a rate of over 6,000 per week (these parts include: temperature management solutions, wiring harnesses, brake cams, gears, and axles). We also see 3Q revenues benefiting from stronger Model 3 ASP’s … a higher-than-typical ‘in-transit’ balance exiting 2Q (nearly 40% of Model 3 production during the June period), and sequential improvement for Model S & X deliveries.”
Shah is reiterating a $450 price target on Tesla’s stock, one of the highest on Wall Street and roughly 50% upside on the current price after a recent drop.
Romit Shah is ranked #281 out of 4,840 Analysts on TipRanks with success rate of 60% and an average return of 16.3%. He has been consistently recommending to buy Tesla over the last year:
While I don’t know about his actual price target, I have to agree with Shah that deliveries this quarter should represent a significant step forward for Tesla.
I say that I’m not sure about his price target because to be fair, the last quarter was also a big step forward and it didn’t have that much of an impact on the stock.
That said, I think this quarter could be an even bigger step forward. I see Tesla delivering over 50,000 vehicles in a quarter for the first time.
I think it could even go up to 60,000 vehicles, but that would be hard (though not impossible) from a delivery standpoint alone.
What do you think? Let us know in the comment section below.