Shares of Tesla (TSLA) are slipping after the company reported deliveries and production for the third quarter last night. While Model S and X deliveries were better than expected, Model 3 numbers came in below estimates. Commenting on the news, Baird analyst Ben Kallo recommended using any weakness as a buying opportunity as he sees the update as good enough, while his peer at Bernstein argued that the report raised more questions than answers.

PRODUCTION, DELIVERIES UPDATE: Last night, Tesla reported that in the third quarter it delivered 26,150 vehicles, of which 14,065 were Model S, 11,865 were Model X, and 220 were Model 3. The company said this was its all-time best quarter for Model S and X deliveries. In total, the company expects to deliver about 100,000 Model S and X vehicles in 2017. In addition to the third quarter deliveries, about 4,820 Model S and X vehicles were in transit to customers at the end of the quarter, which will be counted as deliveries in the fourth quarter. Meanwhile, third quarter production totaled 25,336 vehicles, with 260 of them being Model 3. Model 3 production was less than anticipated due to production bottlenecks. Tesla also noted that "is important to emphasize that there are no fundamental issues with the Model 3 production or supply chain. Tesla understands what needs to be fixed and is confident of addressing the manufacturing bottleneck issues in the near-term."

BUYING OPPORTUNITY: In a research note this morning, Baird's Kallo argued that although Model 3 deliveries were slightly below the range he had outlined before due to manufacturing bottlenecks, production should continue to ramp and he believes Model S and X demand remains strong. Further, he pointed out he had expected the third quarter to be the most challenging part of the Model 3 production ramp and said he would be an "aggressive" buyer on any weakness as he believes Tesla is only two to four weeks behind schedule. Kallo reiterated an Outperform rating and $411 price target on the shares. Meanwhile, his peer at KeyBanc told investors in a research note of his own that he thinks the Model 3 miss was somewhat priced in. Analyst Brad Erickson argued that he sees Model 3 euphoria likely to persist. Nonetheless, high-end demand and likely shortfalls in Model 3 profitability remain his concern and primary focus.

MORE QUESTIONS THAN ANSWERS: Also commenting on Tesla's update, Bernstein analyst A.M. Sacconaghi, Jr. noted that the company's Model 3 production was "dramatically" lower than forecast, and worse than feared. While acknowledging that Model S and X deliveries were strong, the analyst said he believes the fourth quarter guidance of nearly 27K units is ambitious, and that several factors helped S and X demand this quarter, including aggressive price cuts and promotions, the discontinuation of the lowest-end Model S, third quarter seasonality, and publicity from the Model 3 launch. Tesla's production and deliveries report raised more questions than answers, he contended. He continues to believe that the Tesla investment thesis hinges on the success of Model 3, and the company's ability to ramp production, make the car profitable, and deliver good initial build quality. He reiterated a Market Perform rating on the shares. His peer at Goldman Sachs also said while Model S and X topped expectations, he remains cautions on the Model 3 ramp. Analyst David Tamberrino believes this likely puts downward risk to the company's communicated S-curve to the Model 3 production ramp, where it targets 5,000 per week at some time in December 2017. He reiterated a Sell rating on Tesla shares.

PRICE ACTION: In morning trading, Tesla dropped about 1% to $339 per share.