Confirming the Street’s concerns, the release of April and May registration figures for Model 3s in California – Tesla’s “core sweet spot,” – indicated a year-over-year drop of 37%.
“Domestically speaking California remains a linchpin to Model 3 success for Tesla and now all eyes shift to the trajectory in the month of June and especially into the core summer months heading into Fall in hopes of a rebound as Fremont enters 2H,” the 5-star analyst said.
However, California is not the only state reporting weak numbers. In 24 other states, registrations dropped by 33% in the same period.
The Street was already bracing for a COVID shaped decline when it recently brought down expectations for Tesla deliveries this year, reducing the figure to 400,000 units instead of the previously expected 550,000.
Tesla shares have soared recently, clocking an all-time high of $1025.05 on June 10. Instigating the recent rally were the glowing figures reported from its Shanghai Giga 3 factory. The pace of Model 3s zooming out the doors had beaten expectations, hinting at a “staggering China growth rebound.”
Ives believes that China and the upcoming Battery Day, in which Tesla is expected to reveal game changing battery technology, remain key catalysts in the near-term. However, to maintain momentum, Tesla needs to make sure its disappointing performance on home soil won’t become a regular theme.
“The bulls will shrug off these negative California registrations although must see signs of a rebound over the coming months with the lockdown easing and the ‘Fremont Stand-Off’ in the rear-view mirror,” Ives warned.
To this end, Ives keeps a Neutral (i.e. Hold) rating on Tesla, along with a $1,000 price target. (To watch Ives’ track record, click here)
Ives’ rating is backed by the rest of the Street. Based on 8 Buys, 9 Holds and 11 Sells, Tesla scores a Hold consensus rating. However, here is where Ives and the consensus part ways. The average price target is well below the Wedbush analyst’s, and at $678.82, indicates possible downside of a sharp 32%. (See Tesla stock analysis on TipRanks)
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