Tesla Analyst: China 'Star of the Show,' Automaker Set To Beat Q3 Delivery Forecast

After the lukewarm reception to Tesla Inc's TSLA Batter Day, the next catalyst will be the release of third-quarter deliveries by the EV maker.

The Tesla Analyst: Wedbush analyst Daniel Ives maintained a Neutral rating with a $475 price target. 

Ives Says Tesla Poised For Q3 Beat: Tesla likely had a very strong end to the quarter culminating in deliveries of over 140,000 versus the Street forecast of 136,000, Ives said in a Wednesday note. 

This could put quarterly EPS in the range of 55-60 cents, the analyst said. 

The bottom-line number, if achieved, is commendable, as it has come against a soft macro backdrop, with competitors across the board struggling to meet expectations, he said. 

The quarter's strength comes from massive underlying demand in China, specifically for the Model 3 vehicles, Ives said. 

China has been the "star of the show" in September, the analyst said. 

China Model 3 Uptake A ‘Shining Ray of Light' For Tesla: EV demand in China is starting to accelerate, even as Tesla competes with a number of domestic and international competitors for market share, he said. Giga 3 remains the linchpin of its success, Ives said. 

The Model 3 appears to be on track to achieve a run rate of 150,000 unit deliveries in the first year out of the gates of Giga 3, the analyst said.

Model Y deliveries will start to ramp heading into the fourth quarter, he said. 

With margins on Model 3s sold in China being higher relative to the U.S. and Europe, China could also markedly increase Tesla's profitability profile over the next few years, the analyst said.

The China growth story is worth at least $80 in a Tesla bull case given the significant ramp in penetration expected over the next 12 to 18 months and the battery innovations coming out of Giga 3, he said. 

"Overall, Tesla continues to see DeChambeau-like strength around deliveries which bode well for 3Q results." 

TSLA Price Action: Tesla shares were trading 2.52% higher at $439.80 at last check Thursday. 

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Photo courtesy of Tesla.