Tesla Investors Focus on Liquidity, Ignore Model 3 Production Miss

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There’s really nothing much to say about investors positions’ regarding Tesla Inc. (NASDAQ: TSLA): either one believes in the company and CEO Elon Musk or one is skeptical. The believers are carrying the day Tuesday.

In a report released this morning, Tesla said it built 34,494 vehicles in the first quarter of this year: a total of 24,728 Model S sedans and Model X crossovers and 9,766 Model 3 sedans. Total production rose 40% sequentially, and Model 3 output rose by a factor of four.

The company’s Model 3 is priced at around $35,000, well below the prices for the Model S and Model X, and Tesla and its investors are counting on the Model 3 to lead the company to the promised land of profitability.

According to this morning’s release:

In the past seven days, Tesla produced 2,020 Model 3 vehicles. In the next seven days, we expect to produce 2,000 Model S and X vehicles and 2,000 Model 3 vehicles. It is a testament to the ability of the Tesla production team that Model 3 volume now exceeds Model S and Model X combined. What took our team five years for S/X, took only nine months for Model 3. … Tesla continues to target a production rate of approximately 5,000 units per week in about three months, laying the groundwork for Q3 to have the long-sought ideal combination of high volume, good gross margin and strong positive operating cash flow. As a result, Tesla does not require an equity or debt raise this year, apart from standard credit lines.

That last sentence is what’s driving the share price up Tuesday. No share dilution and no additional debt is just what Tesla’s believers wanted to hear. Everything else is just noise. The previous production target of 2,500 a week is easily forgotten.

Shares traded up 7.2% at $270.67 in the mid-afternoon, in a 52-week range of $244.59 to $389.61. The low was posted Monday. The 12-month consensus price target on the stock is $325.58.