Analyst Upgrades Tesla To Buy On Robust Model 3 Demand

Sometimes it’s better to be late to the game than never show up at all. After Tesla Inc TSLA shares have surged 73.5 percent so far in 2017, Argus analyst Bill Selesky stepped in Tuesday and said now is the time to buy the stock.

According to Selesky, it’s Tesla’s robust Model 3 demand that finally convinced Argus to upgrade the stock to Buy. Tesla recently reported that it is receiving 1,800 Model 3 orders per day without Tesla spending any meaningful money on marketing or advertising.

“We think this highlights the strong demand for an electric car that provides buyers with high-end features and styling at a relatively affordable $35,000 retail price — well below those of the company’s earlier models,” Selesky wrote (see his track record here).

Related Link: Wall Street Weighs In On Tesla's Earnings Beat

Although CEO Elon Musk has said Tesla will spend the next six months in “manufacturing hell,” Selesky predicts labor and overhead costs will start to come back down to reasonable levels throughout 2018, allowing Tesla to achieve its 25 percent margin target for the Model 3 by the end of the year. Tesla has already achieved its margin target for the Model X and Model S.

In light of the recent earnings beat from Tesla in the second quarter, Argus has also reduced its full-year earnings loss forecast for Tesla from -$5.48 to -$5.36. Argos is also expecting Tesla to be able to achieve break-even net income in 2018, raising its 2018 EPS forecast from -50 cents to zero.

In addition to the upgrade, Argus has set a $444 price target for Tesla stock.

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Image Credit: By Steve Jurvetson from Menlo Park, USA (The Back of the Tesla Model 3) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons