Thursday, 3 August 2017

Finance: 'It comes down to execution': Here's what Wall Street is saying about Tesla (TSLA)

Elon Musk, CEO of Tesla Motors, poses with a Tesla car in front of Nasdaq after its IPO

Tesla successfully launched its newest car last week, but some analysts still aren't convinced that the stock is a good buy.

Tesla reported a smaller than expected loss on Wednesday afternoon, just three days after the much anticipated launch of its luxury Model 3 sedan, which it says 455,000 people have pre-ordered.

The electric-car maker lost an adjusted $1.33 per share on revenue of $2.79 billion. Analysts had forecast a loss of $1.88 per share on $2.51 billion in revenue, according to Bloomberg.

In total, Tesla burned through $1.16 billion in cash last quarter, up $44 million from the previous year.

Tesla’s stock jumped 6% on the earnings beat, opening Thursday at $345.33. But many analysts aren’t convinced the company can keep the price that high.

Here’s a wrap of some of their commentary:


Rating: Underweight

Price Target: $200 (previously $190)

Comment: “We continue to think that execution risk remains elevated relative to the ramp of production; we are, however, raising our estimates and price target, including on the flow-through of 2Q’s stronger margin trend to quarters beyond 3Q, in part because of management’s strong outlook for 2018 Model 3 margin, as we believe they should have a good handle on component costs, etc., at this late stage in the vehicle’s development, although we remain cautious on the stock overall.”

Oppenheimer: NEUTRAL

Rating: Perform

Price Target: N/A

Comment: “The long-term thesis on TSLA depends on the successful launch of fully autonomous vehicles, but limited information is available on the progress being made nor on testing results for Level 3-5 autonomy.”

“We believe bullish investors will be patient on earnings leverage and are more concerned about steady progress toward fully autonomous vehicles and transforming the transportation market.”

RBC Capital Markets: NEUTRAL

Rating: Hold (Sector Perform)

Price Target: $345 (previously $314)

Comment: “What TSLA has accomplished is extremely impressive, but stock discounts that a lot goes perfectly and smoothly for a very long time … Mid-to-long term success depends on TSLA maintaining great brand which increasingly depends on autonomous, not electrification.”

“Tesla is essentially learning how to become a manufacturing company on the fly. While we don’t have meaningful reason to doubt that Tesla can eventually achieve its targets, doing so in a timely manner without some growing pains could prove challenging. Failure to hit near-term objectives may not impact the long-term view but could hold back the stock or provide a more favorable risk/reward entry point.”

Goldman Sachs: BEARISH

Rating: Sell

Price Target: $200 (previously $180)

Comment: “We remain Sell rated as we see downside potential to the Model 3 launch curve, which we expect will likely drive disappointing Auto gross margins, and further cash burn. Further, we believe Model 3 customer price elasticity will be tested.”

Dougherty & Company: BULLISH

Rating: Buy

Price Target: $375

Comment: "Finding this level of growth from a company of this size is very difficult in this Market. The bottom line is that our Price Target is driven by probabilities around long-term demand for Model 3 and its variants and Tesla's ability to earn a solid margin on this business."

Morgan Stanley: BEARISH

Rating: Equal-weight

Price Target: $305

Comment: "Tesla is a rather expensive call option on disrupting transport and energy but should attract serious competition over time – the stock is trading just over our assessment of fair value."

“While the Model 3 ramp represents an exciting opportunity for Tesla and its shareholders, we also believe the next 6 to 12 months will see a steady and intensifying flow of competitive efforts from very large and well capitalized firms that will be making increasingly conspicuous efforts to encroach into Tesla’s territory of highly safe/automated and electric transport.”


Rating: Sell

Price Target: $185

Comment: "The market should not ignore fundamental challenges that persist with regards to TSLA's Model 3 profitability, stationary storage & solar businesses, and its eventual need to raise cash. We see increased pressure on demand as luxury automakers launch competing products in 2018-20."


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