Analyst slashes his Tesla price target due to 'meager demand' and Model 3 'delivery issues'

  • RBC analyst Joseph Spak dropped his price target on Tesla to $US210 per share, over 20% below Friday’s close.
  • Spak cited expetactations of ‘meager demand’ and Model 3 ‘delivery issues’ for the first quarter of 2019.
  • Tesla shares dropped more than 2% early Monday.
  • Watch Tesla trade live.

Tesla shares slumped more than 2% early Monday after an analyst highlighted concerns about the electric-car maker’s first-quarter delivery estimates and margins.

RBC analyst Joseph Spak, who has an “underperform” rating, slashed his Tesla price target from $US245 to $US210 – more than 20% below Friday’s closing price – due to “meager demand” and “delivery issues” abroad.

Monday’s note follows other firms, including Morgan Stanley and Goldman Sachs, who have raised concerns about demand for the company’s products due to the roll-off of the federal tax credit for Tesla vehicles and the introduction of the Model Y SUV, which could lower current demand for Model 3 vehicles.

Spak now estimates first-quarter deliveries to total 52,500, nearly 10% below the Bloomberg consensus. Tesla is due to report delivery figures for the quarter in early April.

“We continue to see downside pressure to TSLA shares,” Spak wrote. “We see both 2019 and 2020 revenue as down vs. the 4Q 18 run-rate and, given TSLA is priced for growth, believe the valuation will come in.”

In addition, Spak cited delivery issues with the Model 3 abroad, noting that increases in European deliveries have been offset by delays in China arising from customs issues.

He also dropped expectations for margins due to the introduction of the $US35,000 Model 3 in North America, and noted the recent price cuts associated with announced store closures. While Tesla reversed course and decided to keep most of its retail stores open, prices dropped 3% overall across all vehicles except the $US35,000 Model 3.

Spak did not make specific reference to the recent unveiling of the Model Y, but did maintain his 2020 estimate of 347,500 deliveries.

Tesla has had a chaotic 2019 with a number of issues affecting the company including executive departures, further layoffs, and a court filing by the Securities and Exchange Commission accusing CEO Elon Musk of violating his 2018 settlement that prohibited him from tweeting sensitive information without prior approval.

Tesla stock is down 23% year to date.

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