Deepening Tesla Demand Concern Draws New Bear on Wall Street
Tesla's Mounting Demand Concerns Draw a New Bear on Wall Street
(Bloomberg) -- Demand for Tesla Inc.’s cars is expected to see more pressure amid increasing competition, the phase-out of a federal tax incentive and an aging product lineup, Evercore ISI analyst Arndt Ellinghorst said on Monday.
Ellinghorst downgraded the shares to the equivalent of sell from hold, saying “growth cannot stall for a growth company.” It’s the stock’s 15th sell rating among 36 analysts tracked by Bloomberg. Tesla shares dropped as much as 2.6 percent in New York on Monday.
“As growth estimates are coming down, valuation multiples should trend lower,” the analyst said. Investors may look past Tesla’s Autonomy investor day to be held later on Monday until they see more evidence of progress on the business model, he said. Ellinghorst also lowered his price target on the stock to $240 from $330, representing a 12 percent discount to the shares’ last close. The analyst also cut the delivery estimate for 2019 to 369,000 units from a previous 402,000.
Tesla now needs to focus on two key factors: a proper capital raise that can shore up its balance sheet, and an improved or “more thoughtful” strategic decision making process, the analyst said. “We believe Tesla is missing a critical and sustainable layer of middle/upper management and that Tesla should hire and empower more executives with auto experience,” Ellinghorst said.
Separately, Wedbush analyst Daniel Ives said that while the autonomy event is expected to reveal positive developments, “clearly the elephant in the room is first-quarter earnings around the corner this Wednesday after the bell, which based on delivery numbers released and the cost trajectory is expected to be a train wreck quarter.”
Analysts on an average expect a loss of 90 cents a share for the quarter, on revenue of $5.27 billion, according to data compiled by Bloomberg.
Tesla shares were down 2.6 percent at $266.25 as of 9:55 a.m. in New York.
To contact the reporter on this story: Esha Dey in New York at edey@bloomberg.net
To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Catherine Larkin, Richard Richtmyer
©2019 Bloomberg L.P.