Wedbush Securities got in-depth tours of Tesla’s Gigafactory 1 in Nevada and Fremont factory in California. They came out of it with some interesting insights, including that Model Y could result in higher profits as soon as 2020.
Tesla sometimes arranges tours of their operations for financial analysts and in a new note to clients, Wedbush analyst Dan Ives says that he recently was on one of those tours.
At Gigafactory 1, Ives describes a streamlined battery manufacturing process that he believes to be a “major competitive” advantage over other automakers.
After visiting the massive plant, the analyst feels confident that Tesla can build the newly unveiled Model Y there in 2020 and push profits higher “out of the gates”:
“We continue to strongly believe that Model Y production/assembly set to take place in 2020 will be fully out of Giga which has the layout to significantly expand in Sparks and could translate into higher profitability for this key new model out of the gates,”
Even after unveiling Model Y to the public this month, Tesla has been fairly secretive about the production plans for the vehicle, but everything indicates that it will happen at Gigafactory 1 during the second half of 2020.
Ives also continues to believe in Model 3:
“We believe Tesla with the Model 3 has the opportunity to transform consumer auto buying behavior and capitalize on this unprecedented market opportunity and its leadership position in the EV market with the Street now focusing on the demand opportunity rather than the production issues,”
With the release of the new note, Wedbush announced that it is keeping its ‘Outperform’ rating on Tesla’s stock along with 12-month price target of $390.
Dan Ives is ranked #584 out of 5,249 analysts on TipRanks with a success rate of 62% and an average return of 6.8%. He has been recommending Tesla for the past year:
Historically, Tesla has had extreme difficulty controlling costs and ramping up early production volume of new vehicles.
The big money is probably on that happening again for Model Y, but they should be careful.
There have always been specific circumstances that complicated things for every one of Tesla’s vehicle programs, like the complexity of Model X or the first attempt at high volume production for Model 3.
Tesla could have learned from its mistakes and may deliver a smoother production ramp for Model Y.
Time will tell.
What do you think? Let us know in the comment section below.
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