Analysts at R.W. Baird said Tesla Inc. (NASDAQ:TSLA) remained a “fresh pick” Wednesday after Tesla CEO Elon Musk rebuffed a shareholder attempt to overhaul the electric car maker's board and strip him of his role as chairman.
R.W. Baird analyst Ben Kallo reiterated his Buy rating and US$411 price target.
The stock was up 3.5% to US$301.40 in pre-market trade Wednesday after all three directors seeking to remain on Tesla's nine-member board were re-elected during the company's annual meeting held Tuesday in Mountain View, California.
Directors Antonio Gracias, James Murdoch and Elon's brother, Kimbal Musk, won by "a wide margin," according to Tesla.
ABC News reported that CtW Investment Group, an activist firm that represents labor union pension funds, had “spearheaded a rebellion seeking to oust the trio from the board on the grounds that they didn't know about the auto industry” at a critical time when Tesla was struggling to meet its production goals for its first mass-market Model 3 sedan.
Baird analyst Ben Kallo was reassured after shareholders approved the board of directors by a “significant margin.”
“The analyst said the body language was positive, noted that shareholders approved the board of directors by a significant margin and expects management to achieve positive GAAP net income and positive cash flow in Q3 and Q4,” reported Investorshub.com.
Citi’s lingering concerns about the Model 3 sedan
Meanwhile, Citi analyst Itay Michaeli lowered his price target for Tesla to $313 from $347 after refreshing his Model 3 peer analysis. The analyst maintained a Neutral rating on the shares.
“Model 3 demand and autopilot developments are the key "make/break" fundamental call for the second half of 2018,” Michaeli wrote in a note to clients seen by the thefly.com. “The analyst said that while he appreciates the bull case of ramping Model 3 deliveries and Tesla achieving profitability in the second half of the year, thereby easing cash concerns and cementing the carmaker's electric vehicle lead, he can't get there on risk/reward at this point."
According to media reports, missed production targets for the Model 3 contributed heavily to Tesla burning through more than US$1bn in three of the last four quarters. Investors have been worrying Tesla will have to sell more stock or add to its already hefty debt load to raise enough money to survive.
READ: Tesla has refunded nearly one-quarter of Model 3 deposits, says a credit and debit card analytics report
Musk, however, told shareholders that Tesla will be "cash flow positive" during the second half of this year by delivering 5,000 Model 3s with a starting price tag of $35,000 per week.
Musk said Tuesday his company was “quite likely” to build 5,000 of the sedans a week by the end of this month. He reaffirmed his forecasts for second-half profit and cash generation based on that target, and said he still sees no need to raise more capital.
Meanwhile, Bloomberg reported that one of the reasons for Musk’s assurance that Tesla is “turning the corner on manufacturing” is the addition of a third general assembly line that completes the process of putting together the Model 3.