Can Tesla 'Thread The Needle' In Q2? Baird Says It'll Be Buying On Any Weakness

One week ahead of Tesla Inc TSLA’s second-quarter earnings report, Baird analyst Ben Kallo expressed reservations for the near-term but reiterated an Outperform rating and $358 price target nonetheless.

The analyst revised his Q2 and fiscal 2017 estimates to reflect actual deliveries. For Q2, Kallo is looking to see a loss of $2.14 per share and $2.57 billion in sales.

Consensus is above Kallo, with EPS at a loss of $1.81 and $2.56 billion in sales.

Kallo is significantly above the Street for the year though, estimating a loss of $4.51 per share and $12.43 billion in sales.

“We would be buyers on weakness and remain positive on [Tesla]’s long-term prospects,” said Kallo in a note.

Near-Term Catalysts And Concerns

On Friday, Tesla plans to host a “handover party” during which it will deliver 30 Model 3s and unveil new details about the car.

Press surrounding the event as well as the new details themselves could provide a positive catalyst for the company in Kallo’s view.

Reviews as more Model 3 vehicles hit the road are also expected to benefit Tesla, which will also offer updates on production and progress towards 20 percent or greater gross margins.

Management expects to achieve positive gross margins on the Model 3 in Q4, and Kallo believes they could ramp faster than with the Model S and X.

The production ramp will be the focus of investors during the company’s earnings call on Aug. 2. More so than EPS or sales figures, the status of Model 3 production could be the hole Tesla needs to thread to see a positive reaction in its stock.

Many investors are also concerned that the Model 3 will cannibalize sales of the Model S and Model X, and looking to see a positive trend in their respective metrics.

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