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The complexity and steepness of the Model 3 production ramp planned by Tesla Motors ( TSLA ) is likely to bring big challenges and increased risks, says one analyst who lowered his expectations for the electric car maker. “We are tempering our delivery forecast to account for a slower Model 3 ramp,” wrote RBC Capital Markets analyst Joseph Spak, who lowered his price target on Tesla to 242 from 252. Tesla shares rose 0.8% to 219.58 on the stock market today . But shares met resistance at the 200-day moving average. In February, Tesla hit a nearly two-year low of about 141. Tesla said it plans to deliver 500,000 Model 3 sedans by 2018 and deliver 1 million by 2020. “We are all for setting aggressive internal and supplier goals, but as an investor, we believe these targets should be moderated,” Spak wrote. “We were always below Tesla’s vehicle delivery targets of 500,000 by 2018 and 1 million by 2020, but after speaking with industry contacts and reconsidering our model, we are tempering our delivery forecast to account for a slower Model 3 ramp,” he said. The ramp and scale of Tesla’s Model 3 is significantly larger than those for previous models. The starting price for the all-electric Model 3 is $35,000. “In the interim, the Tesla story is about manufacturing, and execution risk is elevated,” Spak wrote. “For the investor with long-term horizons, the ramp is less of a concern. For others, expect a choppy ride with sentiment a large driving factor.” To help accelerate the production ramp, Tesla raised $1.4 billion in capital in a secondary offering, adding to the $1.44 billion in cash and equivalents on the balance sheet as of March 31. Spak forecast a Tesla cash burn of about $1.8 billion this year and $1.3 billion in 2017. By 2018, he estimates, Tesla will have used up its cash supply, suggesting additional capital raises are likely needed. “For now we put another $1 billion equity raise in 2017,” Spak wrote. Scalper1 News
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