To say it’s been a bumpy road for Tesla (TSLA) would be an understatement.
Last week, the electric automaker reported severely disappointing first-quarter production and delivery numbers last week. Although production on the Model 3 rose to a record 62,950 vehicles, this was still below expectations, and total production fell 45% since last quarter. Deliveries, too, saw one bright spot in rising 110% since this time last year, but fell 31% since last quarter.
On the news, Barclays analyst Brian Johnson has maintained his Underperform rating on TSLA stock with $192 price target, which implies nearly 30% downside from current levels. (To watch Johnson's track record, click here)
Johnson says the recent report “indicates an even tougher 1Q than our prior below consensus view.” While the analyst had “viewed the February price cuts as an indication that the demand cliff was real, actual 1Q deliveries imply further downside - especially given the S/X shortfall.” Johnson sees risk until China production begins, which he expects in the fourth quarter, at the earliest.
Johnson says lower S and X deliveries “pressures earnings,” as these two vehicles have stronger margins than the Model 3 (which also missed). The analyst estimates the Model S and X miss “costs ~$200mn vs. ~$30mn for the Model 3.” Furthermore, higher “inventory build was also a drag on cash, which may worsen if Elon Musk pushes production to 500k units in 2019,” as demand may continue not be lower than supply.
While Johnson isn’t too optimistic on Tesla, he does believe “the dramatic fall-off in S/X...validates our view that 'people want to buy a Tesla, so just as they switched from S to 3, some will shift from 3 to Y.” But while higher demand for a particular vehicle is great, coming at the expense of a higher-margin vehicle isn’t something that will help Tesla’s bottom line.
All in all, Tesla’s rocky 2018 has carried over to the first three months of 2019. The company had faced numerous challenges, related to production, demand and pricing, as well as internally with CEO Musk’s squabble with the SEC. While the company is one of the most well-known by investors, some argue its high valuation is a result of speculation and media hype, and that the aforementioned challenges will play a more pronounced role moving forward.
But what is known is that there is no right answer when it comes to investing (or not) in TSLA stock. TipRanks analysis of 25 analyst shows a Hold consensus, with nine analysts Buying, six saying Hold and ten recommending Sell. There is a $297.33 price target on the stock, representing a 10% increase from current levels. (See TSLA's price targets and analyst ratings on TipRanks)
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