NEW YORK (TheStreet) -- Shares of Tesla Motors (TSLA) are lower by 0.38% to $216.29 in early market trading Monday, as analysts at Bank of America/Merrill Lynch issued a negative note on the electric car maker this morning, and cut its price target on the stock to $65 from $70.
The firm says the the company has focused on long-term targets to shift investor focus away from its "disappointing" financial results. However, BofA/Merrill Lynch thinks this strategy will "lose its luster" and will eventually miss investor expectations.
Analysts at the firm added that they think a production pullback created the illusion of accelerating demand of the electric cars.
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BofA/Merrill Lynch has had an "underperform" rating on Tesla shares for more than a year.
Last Thursday, analysts at Morgan Stanley said shares of the electric car maker can hit new highs by the end of the year, if the August Model X launch goes as expected. The firm said it's comfortable with Tesla's spending levels given the car maker's "unique abilities" to disrupt the industry.
Morgan Stanley maintained its "overweight" rating with a $280 price target.
Palo Alto, CA-based Tesla designs, develops, manufactures and sells electric vehicles and advanced electric vehicle powertrain components. Tesla owns its sales and service network.
Separately, TheStreet Ratings team rates TESLA MOTORS INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate TESLA MOTORS INC (TSLA) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, poor profit margins and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Automobiles industry. The net income has significantly decreased by 561.8% when compared to the same quarter one year ago, falling from -$16.26 million to -$107.63 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Automobiles industry and the overall market, TESLA MOTORS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$86.40 million or 166.58% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The gross profit margin for TESLA MOTORS INC is currently lower than what is desirable, coming in at 34.46%. Regardless of TSLA's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, TSLA's net profit margin of -11.25% significantly underperformed when compared to the industry average.
- TESLA MOTORS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, TESLA MOTORS INC reported poor results of -$2.36 versus -$0.71 in the prior year. This year, the market expects an improvement in earnings ($1.10 versus -$2.36).
- You can view the full analysis from the report here: TSLA Ratings Report