Tesla Inc.’s early production problems with the Model 3 could delay or even destroy the chances for the electric car maker’s “iPhone moment,” Barclays analysts said in a note Monday morning.
shares dropped almost 4% Monday, in the first official trading since The Wall Street Journal reported Friday afternoon that Tesla was building parts of the Model 3 by hand. Tesla admitted earlier last week that “production bottlenecks” were hampering the launch of the Model 3, though that did not do any damage to the stock, which gained in five consecutive sessions last week. Tesla stock has gained nearly 63% this year, as the S&P 500 index
has gained less than 14%.
Barclays analysts said that the Model 3 production issues threaten the loyalty of a certain breed of Tesla investor that is not a “true believer” in the company, but does believe that the Model 3 gives Tesla the opportunity to leverage its unique position in electric cars before traditional car makers can catch up. They compare it with Apple Inc.
proving the viability and popularity of smartphones with the iPhone.
“There has been no shortage of investors (both true-believer-uber-bulls and those along for the ride) who have been bulled up on Tesla into the Model 3 launch as they believe Tesla’s ‘iPhone moment,’ in which the world appreciates the revolutionary potential of the product, will be realized by mid-2018,” the analysts, who have a underweight rating on the stock with a $210 price target, wrote.
The Model 3 delays could push that moment back, they say, giving traditional auto makers like General Motors Inc.
, which is marketing the Chevrolet Bolt electric car, and Nissan Motor Co. Ltd.
, which manufactures an electrified Leaf, a chance to better combat the Model 3.
“Amid production delays, it could mean that the Model 3 ramp could be dragged into 2H’18 or even into 2019, when the competitive threat will likely become more imminent,” the analysts wrote. “And in the face of increased competition, the ‘iPhone moment’ appears less certain.”
Barclays analysts’ overall thesis on the company breaks investors down into three groups: The “true believers,” who are along for the ride with Chief Executive Elon Musk no matter how bumpy it gets; the bears, who attack the company at every turn; and those in the middle. Barclays uses a reference to “The Matrix” movies to characterize these groups, with those who swallow “the blue pill” as bulls, those who take the “red pill” as bears, and all the rest as “purple pill” investors.
In the analysts’ view, purple-pillers are in Tesla for the chance of an “iPhone moment,” along with the knowledge that the blue-pillers will help the stock price stay high with their devotion to the company and its leader. To whatever extent the current hubbub threatens Tesla’s chances or its most adamant investors’ confidence, it also threatens the stock price, they say.
“Ultimately, we see risk that these production delays could negatively sway these [purple-pill] investors,” they wrote, though they expect any pressure at the moment to be short-term in nature.
Musk has done his part to shore up support, posting a video of the Model 3 assembly line at work over the weekend.
However, Musk has also delayed plans to show off a new Tesla semi truck design amid the Model 3 issues and a project to help Puerto Rico regain power after it was struck by Hurricane Maria.