After months of waiting and reporting, Wall Street finally got to see the details for the Tesla (NASDAQ:$TSLA) Model 3 during the vehicle’s launch party on Friday, July 28.
For those who don’t know, Tesla’s Model 3 is considered to be one of the most important cars in 2017. With all the hype surrounding the car, it’s surprising to hear that investors have given the vehicle a thumbs down so far. In midday trading on Monday, July 31, Tesla’s shares dropped more than 2%.
“We believe the Model 3 was as good as or better than expected, and pricing was as expected with considerable initial up-sell. That said, the rubber now hits the road, and the fundamental questions remain unanswered,” Toni Sacconaghi of Bernstein said on Monday. “CEO Elon Musk sounds increasingly squeamish about the production ramp.”
Elaborating further, Sacconaghi added that the Model 3 vehicle – priced at $35,000 – will not be available until early next year with only a higher priced model ($49,000) available in 2017. Additionally, the analyst noted Musk’s comments to employees to prepare themselves for “production hell.”
“Tesla’s Model 3 margins will clearly be strained initially, particularly given the company’s huge cap ex ramp, hence its focus on higher priced offerings, only domestic deliveries, and cash and loan sales only,” Sacconaghi wrote.
It’s worth noting that Sacconaghi echoed his market perform rating for shares of Tesla and his price target of $265, which represents 21% downside to July 28’s close.
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