This week is a big news week for auto investors. Now that General Motors Co. (ticker: GM) and Ford Motor Co. (F) have reported mixed second-quarter earnings, investors are focusing their attention on Tesla Inc (TSLA) ahead of its Model 3 media event on Friday and its earnings report on Aug. 2.
Tesla will likely reveal key details about the Model 3 at this week’s event when it delivers its first 30 Model 3 cars to buyers. Investors will be watching for final pricing information and technical specifications for the Model 3, Tesla’s first attempt at a mass-market, long-range electric vehicle. The company originally targeted a $35,000 price.
The Model 3 launch comes on the heels of an announcement this week that the U.K. is joining France in banning new non-electric car sales starting in 2040. The U.K. hopes to eliminate all petroleum and hybrid vehicles from its roads by 2050.
With Tesla shares up more than 60 percent in 2017 and 1,000 percent in the past five years, investors certainly have high hopes for the Model 3. Wall Street remains polarized on the controversial company, which leapfrogged GM earlier this year to become the largest U.S. auto company by market capitalization.
Robert W. Baird & Co. analyst Ben Kallo says long-term investors should consider any short-term weakness in Tesla stock a buying opportunity.
“We would be buyers on weakness, remain positive on TSLA’s long-term prospects, and think the Model 3’s introduction to the market will take several months and will coincide with positive catalysts, such as vehicle reviews, production updates, and progress toward 20 percent gross margins,” Kallo says in a research note on Wednesday.
UBS analyst Colin Langan is among the Tesla skeptics. Langan says Tesla’s current market valuation prices in “optimistic assumptions,” including annual auto sales in the 2 million range within 10 years, no more than 3 percent annual dilution and a price-earnings ratio of at least 25 in the year 2027.
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