As Tesla Begins Delivery Of Its Model 3, Barclays Sees Downside To $165

Tesla Inc (NASDAQ: TSLA) will be live-streaming its first ever deliveries of the new Model 3 sedans on Friday, but Barclays' Brian Johnson is taking the milestone to reiterate a $165 price target on the stock.

At its core Tesla is very much a "successful luxury niche" automaker but at the same time its stock is out of whack with reality, the analyst explained as a guest on CNBC's "Squawk Box" segment on Friday. The analyst did acknowledge that his $165 price target has been in place for around one year and there is no reason to believe that the stock would pull back to his target any time soon.

"This is a stock that is driven by the brand of Elon Musk and as long as the brand of Elon Musk is strong the stock can trade disconnected with the financials," he explained.

Despite a price target, which assumes a plunge in Tesla's stock, the analyst doesn't shy away from offering "trading calls" to clients. For instance, the live-streaming of the new car launch will certainly gather its fair share of press attention and may create a "sell the news" event.

Tesla will face lots of challenges in 2018, namely investors will be looking to see if there is incremental demand for the Model 3 beyond those who reserved the car, he explained. Equally important would be the margin story on the Model 3 as many investors are expecting margins as high as 25 percent.

Bottom line, the analyst is budging on his price target and is sticking to his conviction that over the long-term competitive threats both in the U.S. and international. At that point, the stock would more accurately trade inline with the "financial realities of running what is at the end of the day a car business that isn't tremendously profitable."

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