According to the analyst, the biggest problem of Tesla is not the demand

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China and brand cannibalization are the biggest threats to a bullish case on Tesla, not the demand issues that have been hanging over the stock market since 2019, according to Piper Jaffray.

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TSLA, up 11% this week until close on Thursday, has recently fallen 0.4% to $ 205.20 after rising earlier Friday

Piper Jaffray analyst Alexander Potter on Friday reiterated his overweight rating and his $ 396 price target, which is well above the $ 285 average of FactSet, in effect since October. to which he had increased it by $ 7.

Potter is one of the few bullish analysts to have begun pressuring the stock as the stock tried to oppose the forces that dragged it down for most of 2019. Many analysts have read the first quarter results of the company as a sign that demand for The company's cars are drying up.

Read: Tesla Stock is back above $ 200, hoping to get strong second quarter deliveries

"We understand why some investors view the stock as non-investable," wrote Potter. "But among all the reasons to doubt our overweight thesis, we think that a weak demand is among the least convincing."

Potter says the Model 3 sedan appealed to shoppers who might otherwise have looked for less expensive models, giving it a much broader market potential.

"The Tesla brand appeals to buyers without luxury," he wrote. "Our analysis suggests that about 54% of model 3 demand should come from consumers who would otherwise have chosen mainstream vehicles."

Piper Jaffray expects 289,000 global model 3 shipments in 2019, which is close to the consensus of around 290,000 FactSet.

Read: Tesla goes from the front with cheaper cars in China

"We do not worry about the demand for Model 3, but we recognize the likelihood of a problematic lens in the months ahead," he wrote. "We believe Model 3 will buy more than 3,500 units per year from the more lucrative Tesla vehicles, the S and X models, and the headwind is greater, as this figure represents only cannibalization in the United States."

And in China, he wrote, the company will not be able to fully benefit from market access before the opening of its factory under construction, allowing it to sell cars at more competitive prices. Tesla has recently started taking orders for cars built in China; At present, it imports all cars sold in China.

"None of these problems is an insurmountable obstacle," wrote Potter. "The two problems will disappear once the volume of Model 3 has increased and the Shanghai facility will be open."

Less positive analysts, however, continue to raise questions. In a note on Friday, Cowen's Jeffrey Osborne estimated that Tesla would deliver 74,000 vehicles in the second quarter. FactSet's current consensus expectations for second quarter shipments are 92,000, compared to 95,000 at the end of December.

Read: Tesla Stock abandoned because an analyst had warned him of the "red code"

"Musk and Tesla are facing a" fork in the road "scenario and demand for Model 3 is expected to rebound significantly in the coming quarters so that the company can achieve sustainable profitability," said Wedbush Member Daniel Ives , Friday.

Ives, who has a neutral rating and a target price of $ 230, is a former bull who, at the end of May, reduced his equity target for the fourth time since December. "We believe that Tesla must have a very strong month of June to reach Unity Street. [deliveries] 90,000, which remains a difficult threshold. "

(This story was first published on June 7, 2019. It was updated to reflect stock price fluctuations and to add references to Ives and Osborne.)

Send an email to David Marino-Nachison at [email protected]. Follow him to @marinonachison and follow Barron's Next to @barronsnext.