Red flags were thrown up by analysts regarding the prospects of electric giant Tesla Motors Inc (NASDAQ:TSLA) and micro-blogging giant Twitter Inc (NYSE:TWTR). While one analyst reveals significant operational challenges for Tesla, the other claims that Twitter’s deal to stream NFL’s Thursday night games will not create material revenue for the company. Let’s take a closer look.
Tesla Motors Inc
In a research report released yesterday, Barclays analyst Brian Johnson reiterated an Underweight rating on shares of Tesla Motors, with a price target of $165, despite recent media frenzy of the Model 3 unveil.
Johnson opined, “Admittedly, the stock may grind higher over the coming weeks post the frenzy of the Model 3 unveil – which we do not see dented by the delivery miss, and an ‘unexpected’ fund raise. Then, we would like investors to take a deep breath and realize that: 1) Model 3 is not likely to be delivered in significant volume until 2019, 2) ASP will be more like $50k not $35k, and federal tax credits are eventually slated to expire, perhaps hurting reservation yield, and 3) as the gigafactory won’t be at scale, battery costs may not be low enough for the 20% gross margin target on the Model 3.”
The analyst continued, “A possible $3bn fund raise would bridge the cash burn to 2020: Despite guidance on the 4Q call that it won’t need a capital raise in 2016 (with the expectation that it would only need to return to the market in 2017), we believe Tesla may justify an additional capital need by citing that demand exists to build more car and battery factories sooner rather than later, while also taking advantage of an open capital market.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Brian Johnson has a yearly average return of -2.7% and a 49% success rate. Johnson has a -10% average return when recommending TSLA, and is ranked #3073 out of 3852 analysts.
Out of the 18 analysts polled by TipRanks, 9 rate Tesla stock a Buy, 3 rate the stock a Hold and 6 recommend to Sell the stock. With a downside potential of 4%, the stock’s consensus target price stands at $255.53.
Morgan Stanley analyst Brian Nowak took the same route, reiterating an Underweight rating on shares of Twitter, with a price target of $18, after the company announced it has acquired the digital streaming rights to 10 of the 16 NFL Thursday Night Football (TNF) games for the 2016-2017 season.
Nowak commented, “The monetary attractiveness of these digital streaming rights is somewhat muted due to the fact that TWTR will not be able to sell any of the national advertising spots during the games (which are retained by CBS/NBC). As such, TWTR will only be able to sell the local affiliate ad spots…which make up roughly 2-3 minutes of advertising per hour.”
Furthermore, “It seems TWTR likely acquired these rights largely in order to reinvigorate user growth. We think this will be difficult. First, changing consumer behavior is tough…and watching a 3-4 hour long NFL game is a material change in current consumer behavior given the average U.S. desktop user only spends 0.9 minutes per user per day on TWTR and the average mobile user spends ~3 minutes per user per day. Second, TWTR streamers will not be required to even log in to TWTR to stream the games. This is user friendly, but will not necessarily lead to more monthly active Twitter users.”
According to TipRanks.com, analyst Brian Nowak has a yearly average return of 6.3% and a 64% success rate. Nowak has a 15% average return when recommending TWTR, and is ranked #461 out of 3852 analysts.