Tesla Has A Compelling Long-Term Story, But Will Face Near-Term Headwinds

Wall Street analyst Toni Sacconaghi, was a guest on CNBC's "Halftime Report" on Thursday, where he explained his position on one of the Street's most hotly contested stocks: Tesla Inc TSLA.

Sacconaghi acknowledged that he is "torn" on Tesla's stock. He's bullish on the electric vehicle market going forward, but on the other hand he thinks Tesla's stock is fairly valued at its current level. Moreover, Tesla's valuation implies it will command an equal market share to BMW or Mercedes Benz in the global auto market, and this isn't enough to justify buying the stock.

There's More To The Bearish Story

Sacconaghi expressed concerns over Tesla's gross margins over the next one to two years. Specifically, the company's gross margins continues to struggle even though the company is selling cars with price tags upwards of $100,000. He wondered what that margin profile look like when Tesla starts selling the Model 3 sedan for around $40,000.

Sacconaghi further noted that Tesla needs to oversee a large capital expenditure ramp up over the next year. The analyst estimates Tesla could end up spending $3.5 billion—$4 billion, which will likely impact the company's margins. He also expects the company to raise around $2 billion between the second and fourth quarter of this year. 

Long Term Vision

The analyst called Tesla's long-term vision "compelling," as the company is on a mission to create an "integrated environmentally-friendly home" with solar panels, energy storage and cars.

Nevertheless, Tesla's near term concerns presents a set of challenges for the company to overcome. Sacconaghi has a $250 price target and Market Perform rating on Tesla's stock.

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