Analysts warn of slowdown for Tesla Motors Inc (NASDAQ: TSLA)
Tesla Motors Inc appears to be heading for a bumpy ride in the next few days as analysts begin to reconsider their bullish outlook on the stock. Tesla shares have been on a drastic roller coaster ride since the markets opened for trading this year. Tesla shares slumped to a new 52-week low of $ 180.23 on Tuesday to mark a massive 37% discount from its 52-week high of $ 286.65. Tesla ended the session with a loss of 7.19% on Tuesday and the stock’s weakness was removed 23.8% from its share price during the period since the start of the year.
A number of factors have combined to send Tesla Motors shares into a downward spiral since the markets opened this year. For starters, US stocks did not start 2016 on a particularly impressive footing and there is a sense of weakness in the market in general. However, Tesla has specific issues weighing on its share price. One of the key factors that caused shares of the electric vehicle maker to fall yesterday was bearish sentiment from analysts who believe it is better to avoid the stock now.
Analysts abandon Tesla Motors
MarketWatch Reports that Pacific Crest analysts have lowered their expectations on the electric carmaker’s outlook. Analysts believe Tesla’s inability to increase Model X shipments to meet demand is causing potential buyers to think twice before placing an order, thereby reducing Model X orders.
In the words of analysts, “We are increasingly cautious about Tesla’s aggregate demand,” analysts said. Their latest checks with US sales centers indicate that orders for the Model X are falling short of expectations … While getting the X to showrooms can help, we don’t expect this to happen until sooner or later. late spring due to production issues.
Pacific Crest analysts then dropped their expectations on some key metrics. For example, they now expect Tesla Motors Inc to deliver 17,400 cars in the fourth quarter, down from the previous forecast of 17,820 cars. Analysts postulate that Tesla will deliver 50,580 cars in 2015, up from a previous forecast of 51,000. Fourth-quarter revenue has been slashed from $ 1.78 billion to $ 1.73 billion and the revenue forecast for the the whole of 2015 went from $ 5.38 billion to $ 5.32 billion.
Pacific Crest was the second analyst to drop Tesla since the markets opened this week. Morgan Stanley’s Adam Jonas, who was one of the more virulent Tesla bulls, wrote a negative note on the Tesla Motors prospect on Monday. He predicts a drop in sales Model S volume, Model X and upcoming Model 3. Monday, Adam Jonas lowered his target price on Tesla from $ 450 to $ 333.
We are lowering our price target by 26% to reflect our lower volume expectations for the Model X and Model 3, a lower valuation for Tesla Energy and an acceleration of competition in the mobility sector. In our cautious view of the industry, Tesla remains a core overweight.
There is still hope for Tesla Motors
Tesla Motors is expected to release its fourth quarter (Q4 2015) results after the closing bell next week on Wednesday. The company has made no gestures to suggest that it expects to miss, meet or beat its forecast; therefore, all chatting on wall street could be lumped together as speculation.
If Tesla Motors meets or exceeds its previous forecast when generating profit, the noise associated with declining sales volume will be reduced and the company should be able to regain lost ground. More so, the market might not make too much sense of a business shortfall, as much of the shortfall fears have already been built into the stock price.
Morgan Stanley’s opinion is based on the following 4 points:
1. Model X delays and cost overruns. Manufacturing and engineering challenges delayed launch by at least 1 year and may have added hundreds of millions of dollars to costs while potentially losing some customers. We are planning a slower ramp to ensure the optimum quality of the first vehicles. The expectations of the streets on the significant manufacturing issues that we highlighted about 18 months ago. Higher volumes in the Model S serve as partial compensation. Net impact on valuation per Tesla share: – $ -2
2. Slower (and lower) ramp expectations in the volume of Model 3. It is reasonable to assume that Tesla’s engineering resources have been diverted from other projects to ensure proper execution on X. This, added to the necessity to ensure the highest quality and most efficient manufacturing design on its cheapest car leads us to reiterate our expectation of a Model 3 launch at the end of 2018 (unchanged), at least 1 year later than the intended objective of the company. The low demand for electric vehicles categorically and overall in a $ 30 oil environment leads us to reduce the volume assumptions for Model 3, which we believe will achieve an ATP of $ 60,000 or more. Our revised 2020 forecast for full vehicle deliveries is less than half of Tesla’s target of 500,000 units. Valuation of the net impact per Tesla share: – $ 25
3. Reduced valuation of Tesla Energy. A mark-to-market here. The true cost of owning an energy storage unit seems even higher than we previously thought based on SolarCity’s “all-in” quotes. electricity sector at all times. Additionally, while this is only an indirect factor, we would be wrong not to factor in a higher degree of risk from low energy prices in our assessment of TeslaEnergy. Net impact on valuation per Tesla share: – $ 29
4. Significantly higher levels of interest in the area of shared mobility by a wide range of competing participants. We have been surprised at the pace and scale of announcements and capital commitments by a variety of automotive and non-automotive players focused on electric, shared and autonomous vehicles. Stan ley Research Morgan Stanley does and seeks to do business with companies covered by Morgan Stanley Research. Accordingly, investors should be aware that the company may have a conflict of interest which could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as one factor in their investment decision. For analyst certification and other material disclosures, see the Disclosure section, located at the end of this report. Tesla Motors Inc | February 1, 2016 MORGAN STANLEY RESEARCH 1 in the last 4 or 5 months – all disciplines that we have placed significant value on Tesla, in the form of its core business in vehicles and in our vision of a shared mobility model . We expect the competing efforts of Ford, VW, LG Corp, Alphabet, (and many others) to be genuine and will see significant follow-up in terms of investment and raising of human capital. We believe it is prudent to allow a higher level of competitive pressure in our business model for Tesla Mobility in the form of a greater rate of top line deflation ($ / mile) and more R&D spending. that are not passed on to utility consumers, reducing our Tesla Mobility long-term operating margin to 7.5% from 9.3% previously. In addition, we are now using a discount rate of 13% compared to 11% previously. All other aspects of our mobility model have remained unchanged (number of cars, ramp). Net impact on valuation per Tesla share: – $ 61