Tesla Analysts On Shareholder Meeting: Narrative 'Overly Negative,' 'Herculean Task' In Production Goals

Investors and analysts still aren't fully charged up on Tesla Inc. TSLA despite CEO Elon Musk’s assertion that the company could have a “shot at a record quarter on every level” during the electric carmaker's Tuesday shareholder meeting.

Sales have "far exceeded production," but that production has also been strong, Musk said.

Tesla's share price has dropped through most of the year and was at a two-year low this week, with investors and analysts concerned about lagging demand due to the high price of the company's signature car and a reduced tax credit. Musk used the shareholder meeting to dismiss those concerns.

"I want to be clear — there is not a demand problem," Musk said. "Absolutely not."

Baird: 'Bear Arguments Will Be Disproven'

Baird Equity Research analyst Ben Kallo reiterated an Outperform rating on Tesla with a $340 price target on Wednesday. The analyst said he buys Musk’s assertions and sees several catalysts ahead.

Tesla has shown “several signs” of steady demand in recent weeks, Kallo said.

He likes Musk’s avowal that the company could hit record deliveries — and that orders have not only outpaced production this quarter, but 90% have come from non-reservation holders.

“We believe the narrative is overly negative and think bear arguments will be disproven in the coming weeks and months," Kallo wrote in a note.

Other coming potential catalysts Kallo cited include the beginning of production at Tesla’s Shanghai factory, expected by the end of the year; the unveiling of a new Tesla pickup truck; and announcements about expanding manufacturing and battery production capacity.

"There is a chance” Tesla will be cash flow positive in the second quarter, as the company asserted, Kallo said.

Wedbush Still Neutral

Wedbush analyst Daniel Ives maintained a Neutral rating on Tesla with a $230 price target — and was more cautious.

The automaker's production guidance for the quarter and full year may be too aggressive, Ives said, particularly the 360,000-400,000 unit forecast for the year, which he said “is going to be a Herculean task.” Tesla’s guidance is well above Wedbush’s base estimate of 340,00 to 355,000 units.

“This clearly remains a prove me story in the near-to-medium term as we need to see improving Model 3 demand globally this quarter coupled with profitability in 2H19 to get behind Musk & Co's Model Y, Pick-up and Semi ambitions," Ives wrote in a note.

Price Action

Tesla shares were down 2.6% to $211.38 at time of publication Wednesday.

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Photo courtesy of Tesla.