- Tesla shares fell modestly on Thursday after the electric-car maker reported first-quarter results the evening prior that fell short of analysts’ expectations.
- Wall Street analysts’ commentary in the wake of the quarterly results laid bare the stark divide between Tesla bulls and bears.
- Markets Insider has rounded up a selection of what some analysts, both bullish and bearish, are saying about Tesla’s earnings and where the stock goes from here.
- Watch Tesla trade live.
Tesla missed the mark by a mile.
First-quarter profits and sales out Tuesday evening fell short of Wall Street’s expectations – even as analysts and investors were pre-warned about how disappointing the quarter would be. Shares of the electric-car maker fell 1% early Thursday.
While some analysts said the results were better than feared, and pointed to potentially encouraging portions like the company’s belief that it would generate positive free-cash-flow for the remainder of the year, others said underlying demand remains a concern.
The post-earnings commentary highlights the battleground nature of evaluating Tesla shares. Some noted bulls, like Baird analyst Ben Kallo, stuck to their guns and said the Elon Musk-led company would forge a recovery ahead.
“Demand will likely remain a focus for bears, though we share management’s constructive view,” Kallo said in a note to clients on Thursday, holding steady his “outperform” rating and $US400 price target.
Some noted bears, like Citi’s Itay Michaeli, said Tesla’s balance sheet leaves much to be desired.
“More negatives than positives in Q1 as Tesla swings back to a sizable loss & FCF burn, putting greater emphasis on the need to bolster balance sheet cushion, in our view,” he said in a note to clients late Wednesday, maintaining his “sell/high risk” rating and $US238 price target.
One standout evaluation of Tesla’s results, however, came from one of the most vocal and longtime Tesla bulls, Wedbush analyst Dan Ives, who sliced his price target from $US365 to $US275 and cut his rating to “neutral.”
Since Tesla will likely soon have to raise capital to sustain its capital expenditure and debt needs, with what Wedbush sees as an “inexperienced” chief financial officer, the firm says it can no longer “look investors in the eye and recommend buying this stock at current levels until Tesla starts to take its medicine and focus on reality around demand issues which is the core focus of investors.”
Here’s what else Wall Street analysts are saying about Tesla’s first-quarter results:
Piper Jaffray: ‘Weakish Quarter, but Downside Should be Concentrated in Q1; Staying Overweight’
Price target: $US396
“Although logistical challenges – along with lower transaction prices – had an obvious impact on Q1 profitability, we think this was temporary,” analyst Alexander Potter wrote. “Guidance implies a 2H recovery for both deliveries and margins, and this seems reasonable to us.”
The first-quarter suffered from a “particularly nasty combination” of challenges including seasonality, a build-up in non-US deliveries, and the expiration of US tax incentives.
JMP Securities: ‘Results were weak, but not more than we expected’
Price target: $US369 (cut from $US374)
Rating: Market outperform
“Results were weak, but not more than we expected, and critically, the demand outlook continues to be solid, with 2Q19 ahead of our previous estimates,” Joseph Osha said in a note to clients on Thursday.
“We think it is now clear that U.S. demand should recover over the course of 2019, and that 1Q19 suffered from the impact of business being pulled into 2018.”
Tesla said in its earnings report on Wednesday that a decline in first-quarter Model S and Model X deliveries was due to weaker demand as a result of seasonality and what the company described as a “pull-forward of sales” in the fourth quarter.
UBS: ‘We would expect the stock to trade down on the large EPS & total GM miss’
Price target: $US200
“We would expect the stock to trade down on the large EPS & total GM miss,” analysts led by Colin Langan wrote in a note to clients on Wednesday.
The most notable parts of the earnings report included Tesla’s burning more cash than Wall Street expected – but less than UBS forecasted – and automotive gross margin beating analysts’ expectations, they said.
Wedbush: ‘We no longer can look investors in the eye and recommend buying this stock at current levels until Tesla starts to take its medicine’
Price target: $US275 (cut from $US365)
Rating: Neutral (from outperform)
“At this point the writing is on the wall that Tesla will likely have to raise $US3 billion+ of capital in the near term to sustain its capex and debt needs given its current profitability path, which is another black cloud over the name with an inexperienced CFO now at the helm,” analysts led by Dan Ives wrote in a note to clients on Thursday.
“As such, we no longer can look investors in the eye and recommend buying this stock at current levels until Tesla starts to take its medicine and focus on reality around demand issues which is the core focus of investors.”
Morgan Stanley: ‘Strategic Value Still Overshadowed by Demand, Liquidity Concerns’
Price target: $US240
“1Q results were not as bad as many expected but likely won’t sway bulls or bears from their perches,” analysts led by Adam Jonas wrote in a note to clients on Thursday.
“We think Tesla’s strategic/technological value will remain largely disregarded as long as concerns over demand and liquidity persist. Addressing these concerns can create a window of opportunity.”
Instinet: ‘Visible Path to 2H Recovery’
Price target: $US300
“Management seemed confident in their near-term visibility, in particular, which is encouraging given that the second quarter is already nearly one-third complete,” analysts led by Christopher Eberle wrote.
“Tesla also noted that it expects positive FCF in every remaining quarter in 2019, including 2Q, which we think is likely,” they added, referring to free cash flow.
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