Tesla Investors Need To Take A Deep Breath; Barclays 'Curmudgeoningly' Sticks To $165 Target

Barclays’ Brian A. Johnson believes that Tesla Motors Inc TSLA has been ambitious in drawing meaningful demand for Model 3, however but the question that arises now is whether the company will be able to successfully deliver.

Johnson maintained an Underweight rating on the company, with a price target of $165.

Underappreciated Risk

The analyst believes that Tesla Motors “faces unappreciated risk in ramping volumes (and thus in becoming a mass market OEM) unless it can improve in manufacturing and cash management.”

Johnson mentioned that there was a possibility of the stock moving up over the next few weeks, driven by the Model 3 “frenzy,” despite the delivery miss and “an unexpected fund raise.”

Model 3 Risks

Johnson went on to point out that investors would need to realize that Model was unlikely to be delivered in large volumes before 2019, while the ASP was expected to be closer to $50,000 than $35,000.

The analyst also stated that federal tax credit would eventually expire, which could adversely impact reservation yield.

Johnson also noted that “as the gigafactory won't be at scale, battery costs may not be low enough for the 20% gross margin target on the Model 3.”