Awaiting earnings from Tesla Motors Inc (NASDAQ:TSLA) and Twitter Inc (NYSE:TWTR), analysts are skeptical whether the Model X and a large user base can drive growth forward and keep the social media giant’s wings fluttering, respectively.
Tesla Motors Inc
Brad Erickson, analyst for Pacific Crest, is bullish on Tesla as he lowered his estimate on the stock and recommended that investors “avoid the stock.” Erickson expects to see production and profitability challenges in the long term for Tesla as the company’s sales, consistent with the October check, continue to lag.
Sales for Tesla’s Model X have failed to meet expectations and the model continues to miss showrooms due to production challenges. Although Tesla’s Model S promotion of 20% off the old lease will continue, Erickson does not believe this will drive “noteworthy sales.” Additionally, he is skeptical as to why the lagging demand for Model X has not increased demand for the Model S. Erickson continues, “the addressable market for the Model S may already be hitting its run-rate ceiling” and therefore justifies “lowering estimates through 2020, driven by incremental skepticism of both unit volume production and profitability, along with persistently mixed feedback on demand.”
Erickson believes things could shape up for Tesla with the March release of the Model 3, however he is “reserving judgment until [he] can see the vehicle intended for the mass-market.” If in fact demand continues to oscillate, the stock could experience a “downward re-rating.”
Analyst Brad Erickson maintains a Sector Weight rating on the company but lowers his estimates for Tesla without pinpointing a new target price.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, 6 analysts are bullish on Tesla, 2 are bearish, and 5 remain neutral. The average 12-month price target between these 13 analysts is $295.91, marking a 62% potential upside from where shares last closed.
Stifel Nicolaus analyst Scott Devitt is skeptical that Twitter’s large user base can continue to support the stock if business slows. Additionally, he believes the company’s MAU (monthly active users) growth is at risk due to a “lack of innovation and a limited sense of urgency.” Devitt compares Twitter to Zynga, a company that experienced a similar recent growth decline.
Devitt continues, “Twitter ended 3Q:15 with 320 monthly active users (MAUs), which some suggest is a significant figure and one of the factors that makes Twitter a strategic asset.” However, Yahoo! reports 1 billion MAUs across its platform, yet still remains at a lower implied market value for its core business. Devitt believes that if Twitter is beginning the early stage of decelerating growth similar to Yahoo! and AOL, then there is “likely more downside” for the stock. Devitt concludes that Twitter could face a challenge in reaching its near and long term financial goals given the current trajectory of its users.
Scott Devitt downgraded his rating on the stock to Sell with a price target of $14. The analyst has a 50% success rate recommending stocks with a +15.2% average return per rating.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Scott Devitt has a yearly average return of 15.2% and a 61% success rate. Erickson is ranked #70 out of 3681 analysts.