Tesla Second Quarter Model 3 Orders Could Surpass Wall Street Views

Tesla Inc.’s stock got a boost Monday after one Wall Street analyst got more bullish on the green car maker’s ability to churn out Model 3 Sedans. 

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Wall Street firm JMP Securities said in a research report that Tesla likely delivered twice as many Model 3 sedans during the second quarter when compared to the first quarter. JMP Securities analyst Joseph Osha said Wall Street is underestimating demand for the Model 3. The analyst predicts Tesla will report deliveries of 43,000 models for the June ending quarter and 97,000 for the year. In the first quarter, Tesla delivered around 51,000 Model 3 vehicles. Osha’s forecast is in line with the company’s target for all of 2019.  

Tesla Model 3 Orders Won't Recover Until Next Year

Despite the bullish sentiment on the part of Osha, the analyst did note his expectations are lower than the number of Model 3 Sedans Tesla delivered in both the third and fourth quarters of last year.  The analyst said Model 3 volumes in the U.S. will remain below 2018 levels until late in 2020. Osha has a $347 price target on Tesla’s stock, implying 51% upside. Since the start of this year, shares are down more than 20%. 

Tesla is slated to provide an update on its deliveries sometime this week. The company typically provides a progress report a few days after the quarter closes. The second quarter ended June 30. Investors will undoubtedly want to hear about progress with all of its vehicles but will pay close attention to what it has to say about the Model 3 sedan.

In an email to employees last month Tesla Chief Executive Elon Musk signaled demand was strong during the June quarter.  In the email in mid-May, the outspoken executive said Tesla had more than 50,000 net new orders for the Model 3 and that based on current trends, there’s a good chance it will surpass its record of 90,700 delivered in the fourth quarter of 2018. “Almost all parts of the Model 3 production system have exceeded 1,000 units on multiple days (congratulations!) and we’ve averaged about 900/day this week, so we’re only about 10% away from 7,000/week,” he wrote in the letter to employees.

Despite the optimism on the part of Musk and Osha from JMP Securities, not all of Wall Street expects a strong showing out of the electric vehicle maker. Some analysts are worried about free cash flow at a company that has been burning through cash for awhile now as it boosts production.