Wedbush Bullish On Tesla, But Says Says Automaker Has No Room For Production Errors, Distractions

Recent hiccups notwithstanding, Tesla Inc TSLA appears to have production issues sorted out, and demand for its electric vehicles looks good heading into 2019 as European deliveries ramp, according to Wedbush.

The Analyst

Wedbush Analyst Daniel Ives maintained an Outperform rating on Tesla with a $440 price target. 

The Thesis

Wedbush is most confident in Tesla's long-term opportunity, Ives said in a Friday note. 

“Looking out over the next decade, we believe Tesla and Model 3 have the opportunity to transform consumer auto buying behavior and capitalize on this unprecedented market opportunity and its leadership position in the EV market,” the analyst said. “Tesla has an opportunity to morph itself into an ‘Apple-like consumer brand.’"

In the short-term, much rests on how the company performs in delivering cars to European buyers, Ives said. 

The underlying drivers of the EV market are strong, and demand is rising in Europe and China, the analyst said. 

Those factors, along with Tesla’s improved financial model, make it less likely the company will have to raise more capital, Ives said.

Tesla continues to have a number of issues, Ives said, including future demand in China; the performance of its autopilot technology; a tight balance sheet; and "the Musk dynamic," or the unpredictability of the automaker's quirky CEO.

“There is no room for major production errors or another distraction from Musk & Co., as a cash flow balancing act is needed." 

Ives' comments come despite last week’s announcement by Tesla of fourth-quarter delivery figures that came in slightly under analysts’ expectations, which the Wedbush analyst said was a “a knee-jerk negative for the bulls.” 

The attention now shifts to what Tesla will have to say on Europe production and delivery metrics in Q1, the analyst said. 

The Price Action

Tesla shares were down 0.8 percent at $342.20 at the time of publication Friday. 

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Photo courtesy of Tesla.