Tesla shares pop in pre-market as investors bet on Model 3 success

Tesla Inc’s shares rose 6 per cent on Thursday as investors continued to bet on CEO Elon Musk’s ability to successfully take the company out of “manufacturing hell” as it ramps up production of its mass-market Model 3 sedans.

Gains in the high-flying stock, which has already risen 52 per cent this year, were set to add about US$3.2 billion to Tesla’s market value.

The stock had taken a hit on Monday after Musk warned that the automaker could face six months of “manufacturing hell” as it goes full throttle on Model 3 production.

Tesla said on Wednesday quarterly revenue doubled and that it was receiving more than 1,800 daily reservations for the Model 3, its newly launched mass-market sedan.

The company is counting on the US$35,000 Model 3, launched late last month, to help it turn profitable and transform it from a niche player to a heavyweight in the automobile industry.

“We believe a positive reception to the Model 3 from early customers could significantly increase the value of the Tesla brand and further accelerate demand,” Baird Equity Research analyst Ben Kallo said.

At least two brokerages raised their price targets on the stock. RBC Capital Markets raised its target price by US$31 to US$345, pushing it well ahead of the median price target of US$322.
Growing pains, mostly in the form of production delays and funding issues, are challenges that Tesla needs to overcome.

Tesla’s last launch was the luxury Model X SUV in 2015, which had several production problems and a price tag starting around US$80,000.

Musk has tried to reassure investors saying that a simpler Model 3 design will greatly reduce potential assembly-line problems.

“While we don’t have meaningful reason to doubt that Tesla can eventually achieve its targets, doing so in a timely manner without some growing pains could prove challenging,” RBC Capital Markets analyst Joseph Spak said.

© Thomson Reuters 2017

Leave a Reply

Your email address will not be published.

20 − seven =