NEW YORK (TheStreet) -- Tesla Motors (TSLA) - Get Report stock is down 6.49% to $163.95 in early-afternoon trading on Friday after UBS warned of three risks going into the company's earnings release next week.
Tesla's fiscal 2016 outlook will be in focus in its fourth quarter earnings, the firm wrote in a note, Barron's reports.
For 2016, Tesla will have to contend with historically volatile selling, general and administrative expenses, and research and development costs, according to UBS. These costs will likely continue to accelerate ahead of Tesla's Model 3 launch.
UBS projects that this year's deliveries will be at the low end of guidance, as Model X production appears to be progressing slower than expected, Barron's notes. Low gas prices and an increasingly crowded electric vehicles market will further pressure Tesla's target of 500,000 shipments by 2020.
Additionally, Tesla continues to face storage demand headwinds such as low energy prices and slow initial adoption from utilities, UBS pointed out.
Analysts at Morgan Stanley and Pacific Crest released similarly bearish comments on Tesla earlier this week.
Morgan Stanley slashed its price target on Monday to reflect product launch delays, falling oil and competition, while Pacific Crest warned that demand for the automaker's electric vehicles may be falling.
Tesla is scheduled to report its 2015 fourth quarter financial results on February 10 after the market close.
Insight from TheStreet Research Team:
The bulls' valuation for Tesla seems to always hinge on one number: CEO Elon Musk's prediction of annual sales of 500,000 cars in the year 2020. Tesla delivered 50,580 cars in 2015, so to believe in 10x growth in five years, the longs are betting on a car industry transformation.
For now Tesla is a car company, and the problem is that Tesla already has an extremely high market share.
The only true competitor for Tesla's Model S is...Tesla's Model X. Model X deliveries have just begun (208 were delivered in the fourth quarter of 2015) but priced at just $5,000 more than the Model S, it's a competitor where none previously existed. Cannibalization is a real threat.
Musk would say that competition is good because it proves the concept. As more entrants join the electric-only field, consumer awareness and acceptance will increase. But more entrants aren't joining the field in any meaningful way and electric car sales are declining in the U.S.
Tesla is reaching a very high-end, tech-savvy early-adopter group, and saturation is another risk. The majority of Tesla's "sales" are subject to its Resale Value Guarantee; that includes retail sales and leases that are held by Tesla's banking partners. So they are accounted for as operating leases -- meaning that Tesla bears significant liabilities on a balance sheet that is far from a fortress.
-Jim Collins "Electric Slide: Tesla Motors Is the Worst Stock in the World" Originally Published on 2/4/2016 on Real Money.
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Separately, TheStreet Ratings team rates the stock as a "sell" with a ratings score of D+.
Tesla's weaknesses include its deteriorating net income, generally high debt management risk, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.
You can view the full analysis from the report here: TSLA
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author.