Is Tesla Inc Stock Set to Plunge 35% to Multi-Year Lows?

Teaser for 2018 Buick Velite 6

Tesla Motors will become profitable, starting from the third quarter of this year and therefore will not require additional funding from its investors according to the company's CEO Elon Musk.

As we have reported, the "production hell" that has plagued Tesla's Model 3 roll-out has been a major challenge to Musk and the team at Tesla, as they work to meet orders that are reportedly growing by around 1,800 new reservations a day.

Since launching last summer, the Model 3, which costs $35,000 for the base model and is touted as the first affordable electric auto, has been the subject of much analyst handwringing.

"Beginning on May 3, 2017 and continuing throughout the class period, [the] defendants misrepresented to investors the then-current state of affairs with respect to whether the company was on track to mass produce the Model 3 in 2017, and whether progress had been made supporting [the] defendants claims that 5,000 Model 3s per week would be produced before the end of 2017", the plaintiffs said, according to The Street. Shelby said she was confident the company was accurate in its reporting of worker injuries. A shorter timeline is potentially feasible, the source said, as the Model Y will be built on the same platform as the Model 3. That should lead to less production headaches down the road. The Company produces and sells two electric vehicles: the Model S sedan and the Model X sport utility vehicle (SUV). So we'll see if Tesla learned from its previous operations.

In the case of Tesla, here's what we're working with: the rollout of the Model 3 has been slower-than-expected, which is weighing on revenue and hurting free-cash flow.

The Model Y is just one of many projects in the pipeline for Tesla, which also launched a Tesla Semi and a new Roadster in recent months. It's building out its Gigafactory (in Nevada) and looking to build a factory in China too. Despite the production target miss, the first-quarter 2018 performance of Tesla looks encouraging.Tesla is also focused on geographical expansions and acquisitions for growth.

Don't forget that Tesla now carries $11 billion in debt vs about $3.5 billion in cash and is still shouldering its acquisition of SolarCity.

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Compare that to Tesla's Roadster pre-production claims of hitting a zero to 60 miles per hour time of 1.9 seconds, and the Rimac C Two's claimed zero to 60 miles per hour time of 1.85 seconds.

"I agree", Musk replied. Plus, the cars are gorgeous.

At some point, the financials of the situation need to be taken into account. The stock has "Hold" rating by Oppenheimer on Thursday, August 3.

"Excessive automation at Tesla was a mistake", Musk tweeted. Taking on more debt seems ill-advised, while a secondary offering is always on the table. He's described the process of making the Model 3 as "production hell".

Earlier this week, Goldman Sachs analyst David Tamberrino pounded the table on Tesla stock. It has been assigned a low target price of $18 and a high target price of $22. $305.77's average target is 1.81% above currents $300.34 stock price. About a quarter of that sum was achieved by the Model 3 and it suggests that we are not far away from seeing a stable monthly production figure for the affordable EV.

So should you sell?

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