Tesla Inc. will reach its target production rate of 5,000 Model 3s a week by the end of June, but sustained production at that rate may not happen until some point in the third quarter, Instinet analysts said Monday. "Nonetheless, we see continued, meaningful progress on Model 3 production alongside our expectation for improved gross margins," analysts led by Romit Shah wrote in a note. "This should offer Tesla a chance to achieve its financial targets in 2H18 (such as cash flow positivity and GAAP profitability)." Instinet is expecting the electric car maker to be free cash flow positive in the fourth quarter and for the second half of the year, Shah wrote in response to a CNBC report that Tesla Chief Executive Elon Musk had told employees that "radical improvements" are still needed to hit production goals. Weighing in on a separate report from Second Measure that Telsa Model 3 reservations are growing but 23% were refunded, Shah said he believes the net balance of reservations has remained stable, "as data suggests that incoming deposits have at least offset a recent acceleration in deposit refund requests in recent months." The analyst also expects that refunds went to customers seeking lower average selling prices and that the remaining deposits are for higher trims. Shares were up 1.2% and have gained about 16% in the year so far, while the S&P 500 has gained 3.3%.