ADVERTISEMENT

Tesla's Vexing Quarter Unites Warring Bears and Bulls

Tesla's Vexing Quarter Unites Warring Bears and Bulls

(Bloomberg) -- Tesla Inc.’s weak first-quarter deliveries finally managed to do what several quarters of strong results could not -- unite bullish and bearish Wall Street analysts, with both camps concerned about waning demand for Tesla cars, the need for more cash and Elon Musk’s “reckless” sparring with the U.S. Securities and Exchange Commission.

Tesla shares sank as much as 11 percent on Thursday, after deliveries for the quarter lagged behind recently lowered estimates. The stock could also be reflecting some investor nervousness ahead of a review of Musk’s Twitter post by a federal judge later today.

Here’s a round up of analyst commentaries after the first-quarter delivery announcement.

JPMorgan, Ryan Brinkman

“First-quarter vehicle production & deliveries report was substantially worse than expected.”

“We believe the market postulated that if Tesla were to miss, it would be due solely to a materially greater than expected number of vehicles in transit, but this appears to be only partly the case, with vehicles in transit at quarter-end totaling 10,600 vs our estimate of 10,000, in our view implying lower underlying domestic demand.”

Rates underweight, price target $200 from $215.

Goldman Sachs, David Tamberrino

“While the company referenced encountering challenges as they began delivering models in volume in Europe and China, vehicles in transit to customers also fell below our expectations.”

“Further to the negative, production levels disappointed in the quarter — with the Model 3 weekly production achieving an average of approximately 4,800 (only slightly higher than 4,700 in fourth quarter and below our estimate of 5,500 per week for first quarter).”

“The result likely fuels bearish investors’ concerns about waning demand — especially as these disappointing results came even as the company expanded Model 3 deliveries internationally and began offering $35,000 variants of the Model 3.”

Rates sell, price target $210.

Cowen, Jeffrey Osborne

First quarter was an “ugly quarter,” with lower deliveries and production as “the company was not able to navigate demand issues in the U.S. or logistics challenges in Europe and China.”

“Our estimates for 2019 and beyond could still prove optimistic given demand questions that the company has not addressed besides the production cuts as it reiterated the lowest of its several guidance versions.”

Rates underperform, price target $170 from $180.

Morgan Stanley, Adam Jonas

“First quarter is shaping up to be one Tesla may want to forget, but needs to explain to shareholders who own it as a long-term disruptor.”’

“Deteriorating mix was the biggest negative surprise. S and X volume was roughly 40 percent below our forecast, which is more significant given their high revenue and margin contribution. Barring a near-term refresh in these models, we would prepare for the remainder of the year’s volume of S and X to remain weak.”

“Tesla only said it has ‘sufficient’ cash on hand but did not disclose a precise figure or range, leaving bears to continue to question the firm’s financial strength and potentially adding to uncertainty with customers and suppliers.”

Rates equal-weight, price target $260.

Roth Capital, Craig Irwin

“We see the CEO’s antics challenging the SEC as reckless, and could see similar behavior in court.”

“Cash will be impacted by the weak quarter, so questions on capital market access are important.”

“With the S/X slowdown, buyers at the premium end of the market seem to be waiting for the Porsche Taycan and other high-end vehicles coming onto the market. We expect this impact to only be magnified as the year progresses.”

Rates neutral.

Wedbush, Daniel Ives

“The important bright spot that the bulls could hang their hat on is the all-important Model 3 number was within the area code of Street expectations and will be front and center this morning as slightly ‘better than feared.”’

“On the S/X shipments, demand/production essentially fell off a cliff as Tesla had a train wreck quarter on this front as it appears in some ways the company is almost sun setting these models with all the focus from both the company and customers on Model 3 demand and future versions (Model Y).”

“While we and many on the Street were expecting a soft quarter and believe profitability will return to Tesla starting in the second half with second-quarter profitability at this point still a wild card depending on the demand/cost cutting trajectory at the company, last night’s news puts another near-term overhang over the name.”

Rates outperform, price target $365 from $390.

Baird, Ben Kallo

“A high number of cars in transit at the end of the quarter could impact cash flow, though the company indicated it had ‘sufficient’ cash on hand at quarter end.”

“Model 3 production rates increased slightly (despite the potential impacts of downtime at the beginning of the quarter), though Model S+X production fell sequentially.”

Rates outperform, price target $465.

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, Scott Schnipper

©2019 Bloomberg L.P.