Tesla Can Boost Its Stock Price By 50% If It Meets Its Production Targets

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According to our estimates, Tesla Motors (NASDAQ: TSLA) derives nearly 45% of its valuation from sales of the Model 3, its mass market electric vehicle. When the vehicle was showcased for the first time on March 31 earlier this year, the company had already received close to 100,000 orders for it, more units than it had ever sold of its vehicles in a full year so far. Currently, the number of pre-orders has reached close to half a million units. Recently, the company announced that it was booked out for all of its production schedule for the first twelve months.

According to Trefis, the biggest challenge for Tesla is to increase its production rate fast enough to meet its delivery schedule targets. However, the company has rarely been able to meet these in the past. In the past two years, the company has targeted 35,000 and 55,000 units for the full year but fallen short of both targets. In 2016, it is targeting 80,000-90,000 units but may only barely meet those targets. It is for this reason that we project fewer units sold for the vehicle than guided for by the company. However, if the company meets its targets it can significantly increase our price estimate for Tesla.

model 3 units sold

From the table below, one can see that the Trefis price estimate for the company could increase by as much as 44.3% if the company meets its projected sales target for the first 12 months of production of the Model 3. However, missing the sales target by a greater amount than we expect could lead to a 30% reduction in our price estimate.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Tesla Motors

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