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Wall Street doubts Tesla can hit aggressive targets

Tesla production promise in question
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Tesla production promise in question
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Elon's selling it, but Wall Street's not buying it.

Within 24 hours of Tesla laying out a new, much more aggressive production plan, analysts have roundly dismissed the possibility of the electric vehicle manufacturer coming close to hitting its new target of building a half-million vehicles in 2018.

"We do not believe Tesla will be able to achieve 500,000 units of total production in 2018," JPMorgan analyst Ryan Brinkman wrote in a research note summarizing Tesla's new forecast.

UBS analyst Colin Langan told CNBC, "It's a very challenging target and it will be very difficult to get there."

Tesla Motors CEO Elon Musk reveals a Tesla Energy battery for businesses and utility companies during an event in Hawthorne, Calif., April 30, 2015.
Patrick T. Fallon | Reuters

In fact, among seven analyst reports analyzing Tesla's updated guidance for vehicle production, CNBC found no firms on Wall Street expecting Tesla to even reach 400,000 in annual sales in 2018.

One of the most aggressive forecasts comes from Deutsche Bank, which is modeling Tesla to sell 355,000 electric vehicles in 2018, well below the company's production target of 500,000.

Tesla CEO Elon Musk knows there are plenty of skeptics who think the visionary auto leader has set unrealistic goals. During a conference call with analysts, Musk said strong demand for the upcoming Model 3 is driving the company's new production plan. That includes a surge in Model 3 vehicles being built in 2017 as the automaker prepares for its first deliveries.

"We aim to produce 100,000 to 200,000 Model 3s in the second half of next year," he said.

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While Wall Street may not believe Tesla can go from 2015 sales of 50,000 vehicles to 2018 production of 500,000 vehicles, many analysts have raised their price targets for Tesla shares. Why? The belief the company will continue to disrupt the auto market and eventually profit from the increased production, even if it falls short of the guidance.

Baird analyst Ben Kallo raised his price target to $338 from $300.

"Model 3 should outperform competitors, providing a fully electric vehicle at a competitive price," Kallo wrote in a note to investors.

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