Tesla: Model 3 Delivers. Will the Stock?

On Friday, Tesla (TSLA) launched the Model 3, and reviews were largely ecstatic. But what does the launch mean for the future of Tesla's stock?

Just about everything. Tesla's Model S and Model X were always supposed to be niche vehicles aimed at those with money to spend on high-end vehicles with premium cache. The Model 3, however, is supposed to be the car that gets Tesla's into the garage of the average U.S. consumer.

Bernstein's Toni Sacconaghi and Daniel Chen offer seven initial thoughts on Tesla's Model 3:

The car itself appears to be a winner and is highly consistent with the Tesla brand.
Model 3 now has over 500K orders, more than the annual sales of any entry level luxury
vehicle.
Model 3 won't be available for $35K for a while (early 2018 at the earliest)… and
supercharging is not free either.
Tesla's Model 3 margins will clearly be strained initially, particularly given the company's
huge cap ex ramp, hence its focus on higher priced offerings, only domestic deliveries, and
cash and loan sales only.
CEO Elon Musk sounds increasingly squeamish about the production ramp.
While production has begun, Model 3 may still be in final testing phases – reinforcing our
concern about the potential for quality issues.
Model S cannibalization appears likely, potentially denting near-term economics.

As a result, Sacconaghi and Chen maintain their Market Perform rating and $265 price target on Tesla's stock.

The market, however, doesn't appear to have such reservations: Shares of Tesla have gained 1.6% to $340.58 at 9:41 a.m. today.

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