- Tesla reported fourth-quarter results Wednesday and said its CFO would retire for a second time.
- The announcement took analysts by surprise, particularly as it was made toward the end of Tesla’s earnings call.
- Tesla shares fell 3% in after-hours trading Wednesday.
- Watch Tesla trade live here.
Tesla’s earnings calls have gained a reputation among the investor community as eventful and sometimes colourful updates for shareholders and the analysts tasked with covering the company. The latest call was no exception.
The electric-car maker reported quarterly and full-year earnings results on Wednesday afternoon, and toward the end of the earnings call it dropped a meaningful announcement: the company’s chief financial officer, Deepak Ahuja, would retire from the company for a second time.
At least one equity analyst expressed concern over the timing of the announcement, and one bullish analyst on Thursday said the announcement “overshadowed” what he saw as otherwise solid fundamentals.
Tesla reported fourth-quarter earnings results that fell short of analysts’ expectations, though revenue beat. The company also said it would “continue to produce Model 3 vehicles at maximum production rates throughout 2019.”
In the way of guidance, CEO Elon Musk said the company would achieve a profit for “all quarters going forward.” Tesla has reported two straight profitable quarters.
Here’s a summary of what some Wall Street analysts are telling clients about Tesla’s report:
Evercore ISI: “Leaving Intensive Care… Waiting for Revenues to Ramp”
Price target: $US330
Rating: In-line / Neutral
“Investors should stay on side-line to see how maturing S/X and Model 3 mix dilution will play out,” Arndt Ellinghorst told clients in a report out Thursday. “We also fear that increasing supply of more competitive EV product from peers will shape the industry.”
He added: “As the EV market matures, the exclusiveness of the Tesla multiple might evaporate. We’re not suggesting that Tesla as a brand or company necessarily will struggle but we do expect the severe valuation gap to other leading/premium OEMs may converge over time.”
JP Morgan: ‘See Negative Reaction After 4Q Free Cash Flow Impresses But Aspects of 2019 Outlook and CFO Departure Disappoint’
Price target: $US230 (raised from $US220)
“We expect a negative reaction after Tesla reported 4Q results that surpassed our expectations in several respects, including on margin and particularly on free cash flow, but also introduced 2019 guidance that calls for unit volumes in line with JPM but likely less than assumed by consensus and after it announced the unexpected departure of its long-time Chief Financial Officer,” analyst Ryan Brinkman told clients.
He added: “The real surprise in 4Q, though, was free cash flow which tracked a much stronger $US910 mn vs. JPM $US349 mn and consensus $US412 mn.”
RBC Capital Markets: ‘For now, a cost story, not a growth story’
Price target: $US245
“Model 3 deliveries will take a sequential step back as Tesla is focused on Europe/China shipping,” analyst Joseph Spak wrote. “Tesla indicated it expects M3 production rate to improve vs. 4Q18, but 1Q19 deliveries will be 10k below production due to transit. However, given these regions are next demand lever, this could persist all year and weigh on cash.”
He added: “Dream vs. reality. Total 2019 delivery guidance is 360-400k, which at low end is the 4Q18 rate annualized, so muted sequential growth.”
Baird: ‘Solid Fundamentals Overshadowed by CFO Retirement’
Price target: $US465
“The CFO transition took us by surprise, though we believe Deepak’s retirement reflects the gruelling pace at TSLA and is not indicative of expected future financial performance,” senior research analyst Ben Kallo wrote Thursday. “Deepak will remain with TSLA for several months as Zach Kirkhorn transitions to the role.”
Kallo added: “We continue to believe Tesla Energy may be underappreciated, and think the segment could be a key contributor to profit in 2019.”
Cowen: ‘CFO heads for retirement; demand concerns linger; reiterate underperform’
Price target: $US200
“Tesla’s balance sheet ended up in better shape than anticipated, providing a level of comfort for paying the $US920mn in maturing debt in March,” analyst Jeffrey Osborne told clients. “Concerns linger on demand and underfunded capex.”
Referring to the chief financial officer’s leaving Tesla, Osborne wrote: “We were concerned by both the timing of the retirement, having rejoined the team less than two years ago, as well as the announcement after all of the retail investor and analyst questions had been asked.”
Oppenheimer: ‘Strong CF Performance; Raising PT to $US437’
Price target: $US437 (raised from $US418)
“We continue to be impressed with the earnings leverage in the model as we raise bottom-line estimates,” Colin Rusch said Wednesday.
“We believe there is potential upside to our GM and FCF expectations and shares will follow cash generation, especially given the CFO transition. We expect this management change will weigh on shares [near-term] but ease as TSLA posts strong financial results.”
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