TSLA. Mind the "step-function increase" in Tes

TSLA. Mind the "step-function increase" in Tesla's (TSLA) revenue, if you're a bear, warns Instinet's Romit Shah today.

Shah, noting that short interest in Tesla stock is likely headed back to near-record levels, at $12 billion, thinks the worry over insolvency is misplaced. That increasingly negative attitude follows a report last weekend by The Wall Street Journal stating that Tesla asked some suppliers to refund money spent on parts. That, plus lots of discussion of a class-action suit against it for false claims about production of its Model 3 sedan.

Higgins notes that Tesla in the memo calls the refunds "an investment" in Tesla, and points out that "all suppliers were being asked to help it become profitable."


"The bankruptcy narrative though is reemerging just as revenue is about to make a step-function increase," writes Shah, who has a Buy rating on Tesla shares, and a $450 price target.

"We are now forecasting revenue to grow 60% sequentially in 3Q to $6.4 billion, driven primarily by sustained Model 3 production."

That estimates would be quite a bit higher than the current consensus forecast for Q3's revenue of $5.52 billion.

Tesla reports Q2 results, and presumably its Q3 outlook, on Wednesday, Aug. 1.

Shah writes the parts orders at Tesla for the Model 3 are running ahead of the 5,000 per week that had been the big stretch goal last quarter, and which Tesla said it reached in the final days of the June-ended three-month period.

"Our supply chain checks in Taiwan and Korea indicate that Tesla is currently procuring Model 3 parts at a rate of over 6,000 per week," he writes, including "temperature management solutions, wiring harnesses, brake cams, gears, and axles."

Shah thinks Tesla will see a benefit in Q3 from higher average selling prices on the Model 3, as well as the elevated number of the cars that were " in-transit " at the end of Q2, which was "nearly 40% of Model 3 production during the June period."

He's projecting Tesla will deliver 54,381 Model 3s this quarter, and total deliveries of 79,029 vehicles.

Tesla stock today is up $4.39, or 1.5%, at $301.82.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Technology , Stocks
Referenced Symbols: TSLA

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