Shares of Tesla (NASDAQ:TSLA) took a hit Monday following a bearish analyst note from Goldman Sachs. The investment bank said it expects the automaker to disappoint when it comes to vehicle deliveries during its first quarter. Notably, Goldman Sachs analyst David Tamberrino said Tesla's crucial Model 3 production ramp-up is meaningfully behind where it should be. As of 2:50 p.m. EDT, shares were off 3.2% for the day.
Of course, investors shouldn't give too much weight to analysts' reports in their investment decisions -- it's better to rely mostly on direct sources like companies' SEC filings and earnings calls. But given that Tamberrino's price target of $205 is about 34% below where the stock is trading now, with a sell rating, the rationale behind his extremely bearish view of the electric-car company is worth considering.
Will Tesla miss targets again?
Tesla's first quarter will be an important one. After it delayed its Model 3 production targets two times for a total of six months, investors are growing weary of its overly confident forecasts. With this backdrop in mind, it's easy to understand why Tesla stock sold off on Monday when Tamberrino called for even more vehicle delivery and production misses from the automaker.
"We believe the company is tracking below its 2018 Model S/X [delivery] guidance of approx. 100k units (an implied 25,000 per quarter)," said Tamberrino in a note to clients. "Further, while monthly Model 3 deliveries are showing sequential improvement, we estimate that they will fall well short of consensus expectations."
Did Tesla set the bar too high?
After revising its ramp-up schedule twice, Tesla now aims to achieve a production rate for its new Model 3 of 2,500 units per week by the end of Q1, and 5,000 units per week by the end of Q2. Though these targets are well behind Tesla's initial prediction that it could finish 2017 producing 5,000 Model 3 units per week, they're still extremely ambitious.
For some perspective, Tesla's 2017 deliveries of just over 100,000 units required an average production rate of about 2,000 units per week -- and that was spread primarily across two models: the Model S and X. Now management is aiming to ramp up Model 3 production from a total of just 2,425 units during Tesla's entire fourth quarter to a run rate of 2,500 units per week by the end of Q1. Further, Tesla predicted its revenue growth rate will significantly exceed the 55% year-over-year growth in organic revenue it produced in 2017 as "hundreds of thousands of people" switch to its electric vehicles.
To say the least, Tesla has some extraordinary ambitions for 2018. This has investors watching Tesla's growth story closely. And it has bears like Tamberrino cautious about the electric-car maker's ability to hit its targets.