Heading Into Tesla's Q1, Model 3 Presents More Questions Than Answers

Tesla Inc TSLA shares are headed into first-quarter earnings at all-time highs above $320, but investors anticipating the launch of the Model 3 later this year should keep expectations in check. According to Cowen analyst Jeffrey Osborne, market euphoria for Tesla stock will likely only last until the Model 3 is launched.

“We see likely ramp delays in Model 3, greater transparency about true capital needs, and margin pressure dampening enthusiasm over time; however, until the Model 3 actually is launched we see the stock continuing to work as right now investors continue to buy into the Model 3/low cost battery story,” Osborne explained.

What To Look For

In the near term, Osborne will be looking for the following four details on Tesla’s Q1 earnings call:

1. Any indication of how Tesla plans to raise capital for an estimated $3.6 billion per year in 2017 and 2018 capex.
2. Any details on the Model 3 production ramp, given reports that Kuka AG robots are being installed in Fremont.
3. Order trends for Model S that could provide clarity on possible saturation/cannibalization.
4. The possibility of full-year Model 3 guidance, although Cowen predicts the company will not issue any such guidance.

In addition, Osborne would like to see an update on the integration of SolarCity and plans for the company moving forward.

While Osborne acknowledged the unique vision of CEO Elon Musk, he said more things can go wrong for Tesla than can go right at the stock’s current valuation.

Cowen maintains an Underperform rating on Tesla and a $155 price target for the stock. 

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Dan Nathan's Hedging Strategy For Tesla ________ Image Credit: By Jakob Härter - Tesla Model S P100D, CC BY-SA 2.0, via Wikimedia Commons