Taking Stock Of Tesla Motors, With Model 3 Launch A Week Away
The long-awaited Tesla Motors ( TSLA ) Model 3, hailed as an electric car for the masses, is due for its unveiling next Thursday, March 31. The company sent out invitations Thursday to prospective buyers to watch the livestream event at 8:30 p.m. Pacific Time at Tesla.com. Tesla said it will start taking reservations on the website at that time. But it said “a better spot in the queue” would come from just visiting a Tesla store when it opens on March 31, elaborating on a Tesla blog post earlier this week. Priced at $35,000 before incentives — half the cost of Tesla’s Model S and Model X — the Model 3 is meant to go up against the likes of the BMW 3 Series and other gas-powered entry-level luxury vehicles from Volkswagen ‘s ( VLKAY ) Audi and Daimler ‘s ( DDAIF ) Mercedes-Benz. It will also compete with hybrids from many makers, as well as General Motors ‘ ( GM ) planned Chevrolet Bolt EV, which is expected to get more than a 200-mile range between recharges and sell for $30,000 before incentives. The Model 3 will share the same design language with the Model X, including a “relatively larger windshield,” similar to what an Apple ( AAPL ) Car “is also very likely to have,” said Global Equities Research analyst Trip Chowdhry in a research note last week. Apple hasn’t confirmed it’s working on any car, though it has hired several auto industry executives to work on a closely guarded project. How Does Tesla Motors Stock Look? Hopes for Tesla’s ability to build and sell a sizable number of Model 3s have helped push up Tesla’s market capitalization to five times the California startup’s annual revenue. How well the Model 3 does — along with whether Tesla can build it on time (starting in late 2017) and get battery costs low enough to make the car profitable — are key issues that investors will be watching. Tesla stock gets a low IBD Composite Rating of 27 out of a possible 99. The CR factors in a raft of metrics such as earnings growth, company and industry stock performance, and the degree of institutional buying. Fiat Chrysler Automobile ( FCAU ) is highest-rated in IBD’s Auto Manufacturers industry group, with a 55 CR, followed by Ford ( F ) at 51. The group itself is near the bottom in performance, ranking 182 out of 197 groups that IBD tracks. Tesla shares lifted more than 2% in afternoon trading on the stock market today , near 228. While the S&P 500 index has declined 1% so far this year, Tesla stock is down 6% after gaining 8% in 2015, jumping 48% in 2014, and rocketing 344% in 2013. What Are Analysts Saying About Tesla? Analysts on the whole are mildly positive on Tesla. Of 21 tracked by Thomson Reuters, five call it a strong buy, four a buy, and six rate it at hold or underperform. Analyst Chowdhry said in a research note that the silhouette of the Model 3 in Tesla’s event invitation “does not reveal much. … However, based on monitoring TSLA since 2009, Model 3 will be anything but ordinary … and as TSLA has done in the past, Model 3 will very likely push the auto industry back to the design board.” On Wednesday, S&P Global Market Intelligence analyst Efraim Levy cut his opinion “on these volatile shares to sell,” with Tesla now trading well above his 155 price target. “The shares have rallied sharply recently in anticipation of the Model 3 reveal later this month and amid bullish comments from some equity analysts. While we expect sales and EPS to surge in ’16, we see significant execution and valuation risk in the premium priced stock,” he wrote. Short-seller Citron Research, which expects supply and demand problems as Tesla tries to scale up production, recently targeted Tesla stock. The timing of the Model 3 concerns Karl Brauer, senior analyst at Kelley Blue Book, “because it’s at least a year after the Chevrolet Bolt arrives, and additional pure electrics with a similar range could easily show up by late 2017. These competitors will have full sales and service support in every state and major market, putting the pressure on Model 3 to keep up in this rapidly expanding market.” Several analysts have called Tesla years ahead of auto industry competition in electric vehicle design, giving it a continuing edge.