Tesla's Record Q2 Deliveries: What Wall Street's Saying
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While investors were cheering Tesla's (TSLA) - Get Report news that it had delivered a significantly better-than-expected number of vehicles in its second quarter, Wall Street analysts were much less impressed.
On Tuesday after the close, the electric carmaker announced that it had delivered 95,200 vehicles in the second quarter, ahead of expectations of 90,700. Tesla's stock jumped in after-hours trading and were trading up 5.7% to $237.32 on Wednesday morning.
However, several analysts pointed to ongoing concerns about Tesla's profitability, declining sales of higher-margin Model S and X cars and the company's cash burn.
Here's what analysts said:
Jeffrey Osborne, Cowen, Underperform, Price Target $140
While deliveries came in stronger than our expectations, which likely boosts shares in the near term, we continue to expect TSLA to fade into earnings as investor attention shifts to the financials. We remain concerned about margin pressure due to price cuts and mix, as well as 2H19 demand given 2019 guidance was not reiterated and the lack of disclosure on the steady state of demand.
Rajvindra S. Gill, Needham, Underperform, Price Target N/A
Despite strong production and delivery numbers, we remain cautious on Tesla's ability to remain profitable and maintain healthy gross margins in the long-term. Declining sales of higher-margin Model S and X vehicles (GM of 25-30%) and a lower mix within Model 3 are already pressuring the GM. Additionally, we believe competitive pricing pressure and lower ZEV credits will further suppress margins. Although TSLA recently raised capital, we remain cautious with regards to cash burn and potential difficulties maintaining positive FCF.
John Murphy, Bank of America, Underperform, Price Target $225
There still remain a number of hurdles ahead for TSLA, including: (1) ongoing Model 3 production ramp and future challenges associated with an expanding product lineup (Model Y, Semi, Roadster, etc.); (2) what could be continued cash burn from ongoing delivery/logistics issues and Shanghai factory construction, that could pressure liquidity even with the recent capital raise; (3) spike/burnout pattern for Model S/X and now potentially Model 3; and (4) the prospect of new competition and longer-term obsolescence. And while recent capital raises could put liquidity concerns about TSLA to rest (for now) and buy additional time for the company, TSLA's pathway to becoming a self-funding entity is still uncertain. As such, we continue to question TSLA's longer term profitability, cash flow, and valuation, and maintain our Underperform rating.
Toni Sacconaghi, Jr., Bernstein, Market Perform, Price Target $325
On net, we see Q2 deliveries as likely to mitigate bears' near-term cash/liquidity concerns, but suspect that until investors have a better read on steady state Model 3 demand and its margin profile, and/or Model Y's launch is imminent, the stock is unlikely to break out from current levels.
David Tamberrino,Goldman Sachs, Sell, Price Target $158
We continue to focus on the sustainability of demand for the company's products - particularly as we believe 2Q19 deliveries and order flow was helped by the company's release of its Standard Model 3 variant, a leasing option, and right-hand drive Model 3s ... further, demand in the US was likely aided in 2Q19 by the looming second step in the phase out of US Federal Tax Incentives for TSLA vehicles that began on July 1. As a result, we continue to expect some sequential stepdown in demand and ultimately deliveries as we progress into 3Q19. That said, the near-term focus will be on the full quarterly results that likely come toward the end of the month as the move to offering a lower priced Standard Model 3 variant as well as leasing option could have negative impacts on Model 3 program gross margins and FCF generation.
Colin Langan, UBS, Sell, Price Target $160
The Q2 delivery beat does not change our cautious view on Q2 earnings. Price reductions, the wider availability of cheaper versions of the Model 3, and the phase out of the US EV tax credit ($1,875) helped Q2 deliveries. The price cuts will likely result in margin pressure. Based on the higher than expected deliveries, we are raising our Q2 EPS estimate to -$0.17 from -$0.78; we expect consensus estimates will be revised similarly. However, as we believe much of the demand was pulled forward from H2, we are maintaining our FY19 EPS estimate.
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