Wary Of What Tesla's Q3 Will Hold, This Analyst Says Buy On Any Weakness

Ahead of Tesla Inc TSLA's third-quarter results, Baird analyst Ben Kallo said he'd buy the shares on any weakness.

Though cautious into the quarter, Baird remains a long-term buyer, Kallo said in a Wednesday note. 

Tesla is scheduled to release its results after the market close Wednesday, Nov. 1. 

The firm maintained its Outperform rating and $411 price target for Tesla. 

At the time of writing, shares of Tesla were slipping 3.29 percent to $326.24.

Baird Lowers Estimates

Baird lowered its estimates for Tesla to reflect lower absorption from the Model 3, which Kallo said will impact margins, and potentially lower ASPs on the Model S and Model X vehicles. 

The firm projects Tesla's third-quarter revenues at $2.879 billion; gross margin of 16.3 percent; and a loss per share of $2.78. This represents a scale down from Kallo's earlier expectations for revenues of $3.058 billion, a gross margin of 18.4 percent and a loss per share of $2.21.

Despite the Model 3 ramp being one to two months behind schedule, Tesla will successfully ramp production and meet intermediate production targets, Kallo said. If production challenges continue through April 2018, the production ramp will become a larger issue, given the potential need for additional capital, Kallo said. 

Tesla's upcoming semi-truck unveiling Nov. 14, should serve as a positive catalyst, Kallo said. The continued ramp of the Model 3 and progress toward becoming cash flow positive are Tesla's two largest catalysts, the analyst said. Here's Baird's take on the biggest catalysts for Tesla stock: 

• The semi truck unveiling. 
• The ramp of the Gigafactory and additional Tesla energy project announcements.
• Increasing Model 3 production and gross margins.
• The ramp of Tesla roof production and installations.
• Details about potential expansions in China and other locations, and future products.

Related Links: 

The Model 3, Cash Burn And Autonomous Tech: What To Listen For On Tesla's Q3 Call 

Tesla Reportedly Close To Operating Its Own Manufacturing Facility In China

Photo courtesy of Tesla.