Is Tesla's Road to Production Rocky?

NEW YORK (TheStreet) -- Despite all the hoopla and positive press Tesla Motors(TSLA) received for the Model S launch, reports of production being pushed out is driving shares down a long, winding road of uncertainty.

Wunderlich Securities analyst Theodore O'Neill downgraded Tesla, cutting his rating to sell and slashing his price target to $28 from $49 on production concerns. Even though Tesla has reiterated it intends to produce 5,000 Model S cars for 2012, O'Neill isn't sure how the company can achieve this.

"While initially saying that it would produce and sell 1,000 cars in 3Q12, Tesla now says it will certainly be 500 cars," O'Neill said in his report. He believes there will be cuts to third-quarter estimates, as Tesla's production rate may be pushed out.

In an exclusive interview earlier this year with The Street, Tesla Chief Financial Officer Deepak Ahuja said he was "pretty confident" that Tesla would be able to achieve a 20,000-unit run rate for the Model S by 2013.

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O'Neill noted that Tesla could be having trouble getting the cars "right," and that may very well be the reason for the rumored production shortfall in the third quarter. Tesla is still sticking to its 5,000-unit rate for the full year.

Not all analysts agree that Tesla will suffer from production issues, as Aaron Chew, senior alternative energy/solar power analyst at Maxim Group, said he believes Tesla is operating normally.

"While we cannot rule out the prospect of certain customer orders being shifted a month or two, we have discovered no evidence of any widespread production issues and believe that a handful of order delays wouldn't threaten its 2012 target of 5,000 deliveries," Chew wrote in his research report. He rated Tesla shares a buy with a $50 price target.

In fact, Chew said he believes Model S reservations have actually picked up since Tesla started delivering the car last month. He believes positive reviews and an official range of 265 miles helped "propel Model S orders up sequentially from 1,800 in 1Q12, to over 2,000, by our estimates, in 2Q12."

Shares of Tesla were down sharply in Wednesday trading, off 2.82% to $32.41. Tesla's stock has gained 13.61% year to date.