One analyst has determined that electric car leader Tesla Motors Inc (NASDAQ:TSLA) is experiencing a negative demand shift away from its higher margin vehicles, while another remains bullish on sportswear giant Nike Inc (NYSE:NKE) following its FQ4 earnings report. While zero to sixty miles per hour in 3.2 seconds is impressive, lets take a look at why Tesla may be hitting the breaks instead of initiating launch control, and why Nike could be the one crossing the finish line at back breaking speeds.
Tesla Motors Inc
Following an analysis of the demand across Tesla’s model range, Pacific Crest analyst Brad Erickson remains neutral on the company. The analyst believes that a demand shift from higher-end Tesla models to lower-priced models could dilute the company’s gross margins.
The analyst explains, “Our checks with 15 sales centers around the United States indicate that demand for the recently launched, lower-priced 60 kWh Model S has gotten off to a solid start… we think that roughly half the demand for non-90 kWh Model S cars is skewing toward this lower-price, lower-margin car, which we estimate could amount for a bit over 10% of total units.”
With this estimate, the analyst lowers his out-quarter unit assessments for Tesla, along with his average selling price and gross margin assumptions to reflect the unfavorable demand shift. The upcoming release of the new Tesla Model 3 also causes some concern for Erickson. The analyst believes that the Model 3 seems “overly ambitious” and that the production of this vehicle could be “fraught with financial risk” for the company.
In combination with his worries surrounding the new Model 3, Erickson also cites production ramp challenges that could contribute to further headwinds for the Tesla.
Erickson reiterates his Sector Weight rating for Tesla with a “fair-value estimate” ranging from $190 to $212 per share.
As usual, we recommend taking analyst notes with a grain of salt. They are often successful in moving the stock price, but you always need to take things into perspective. According to TipRanks.com, analyst Brad Erickson has a yearly average return of -18.0% and a 36.1% success rate. Erickson has a 11.0% average return when recommending TSLA, and is ranked #3803 out of 4013 analysts.
Currently, 38% of analysts weighing in on TSLA issue a Buy rating, while another 38% maintain a Hold rating, and the remaining 24% uphold a Sell rating for the stock. The consensus price target for TSLA is $266.83, marking a 24% upside from current prices.
Following Nike’s FQ4 earnings report, Baird analyst Jonathan Komp shares his insights on the company, explaining why he remains bullish on the future of the athletic retailer.
The analyst believes that estimates have been reset for the athletic retailer with F2017E consensus EPS falling by approximately 2% to $2.40 per share and FQ1 EPS dropping to $0.56 amid the impacts of currency hedging, inventory clearing, and other accounting, sales, and administrative expenses. Komp includes that futures look stable for the company, up roughly 11% without any front or back-weighted bias. In addition, Nike management seemed satisfied with +6% North American futures, as the company has held back some inventory to sustain a healthy market.
According to Komp, DTC strength indicates strong demand across Nike’s on-the-ground operations and online retail efforts. The analyst includes that Nike’s innovation pipeline is healthy and the company is bullish about global market demand. Additionally, he believes that North American liquidations are concealing principal operational enhancements and product cost savings that will shine through later in the year.
The analyst reiterates an Outperform rating for NKE with a price target of $67.00.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Jonathan Komp has a yearly average return of 4.7% and a 55.3% success rate. Komp has a -0.2% average return when recommending NKE, and is ranked #933 out of 4013 analysts.
The consensus price target for NKE is $64.79, marking a 16% upside from current prices. In the last three months, 76% of analysts currently give Nike a Buy rating while the remaining 24% issue a Hold rating for the stock.