Tesla’s (TSLA) ambitious expansion into the international market gathered momentum this month with the first batch of Model 3 getting ready for delivery in China and orders pouring in from Europe. However, the electric carmaker seems to be caught between two extremes on the production front. While Tesla struggled to meet the delivery deadlines last year, experts predict that CEO Elon Musk may have to tackle the issue of excess capacity this year.
In the upcoming quarter, financial performance is likely to improve compared to the December quarter, when earnings missed estimates amid price cuts for Model 3 and delivery delays. A section of market watchers believes Model 3 will continue to drive Tesla’s growth this year, adding to the improved investor sentiment. The general outlook on the company, which sustained the turnaround in the most recent quarter, is bullish.
Underscoring the positive sentiment, brokerage firm Canaccord Genuity upgraded Tesla’s stock to buy from hold, driving the company’s stock higher on Monday. The analyst is particularly impressed by the stable cash flow and the reduced concerns over the management’s ability to repay debt. The outlook issued by Tesla earlier forecasts an improvement in profitability and cash flow in the first quarter and beyond.
Meanwhile, Tesla might find it difficult to maintain its market share in the electric vehicle segment, with automakers across the world vying to join the EV revolution. As competition becomes more intense, Tesla will have to streamline operations to achieve the elusive stability.
An official statement this week said an institutional investor, which used to be Tesla’s second-largest shareholder after Musk, reduced its stake in the company by about half. T. Rowe Price trimmed its stake in the autonomous car maker to 5.2% from 10.2%.
The report triggered a sell-off and the stock pared some of its early gains during the extended trading session Monday, after climbing about 3% during the regular session. The stock witnessed significant volatility in recent months but hovered near the record high seen a couple of years ago. Currently, it is in the recovery mode after falling sharply in mid-January.
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