Tesla (TSLA) had a rough 2018 with lots of drama. The company’s CEO Elon Musk was in the spotlight for acting erratically, he dealt with legal troubles and the company missed its production goals – just to name a few woes. It all seemed to pile up for Needham’s Rajvindra Gill, who pinpoints the Model 3 deliveries as just one of the reasons for him to maintain an Underperform rating for Tesla. (To watch Gill’s track record, click here)
“Entering into an uncertain demand environment, which is subject to consumer spending and macro/ tariff related concerns, we are cautious of holding names that have a significant amount of leverage and lack of cash flow. The combination of several factors including declining volume, lower margins, debt repayment, plus high valuation, puts TSLA in a uniquely vulnerable position, as we see it,” the analyst says, pleading his case.
Model 3 deliveries missed consensus with 90.7k delivered versus 90.8k expected by the Street. While this one is a slight miss, other models like the S and X did not even come close. The analyst also points out his concern over reservation holders. More than three-quarters of the Model 3 orders in Q4 came from new customers instead of reservation holders, with an overwhelming majority mid-to-high priced variants.
“Based on 4Q18 deliveries, deliveries for Model S and Model X will decline ~2% Y/Y to 99.4k, down from 101.3K in 2017. Unit growth in these models peaked in 4Q17 and have been declining over the last four quarters. We would emphasize that units still declined year-over-year despite the full $7,500 credit being available in 2018, and which will decline in half in January 1, and disappear altogether in 2020. Moreover, there are several competitive models hitting the marketplace in 2019/2020 which will place further pressure on the Model S and Model X sales,” the analyst notes.
Overall, Wall Street is split between the bulls, the bears, and those who are more cautious on the electric car empire, with TipRanks analytics exhibiting TSLA as a Hold. Out of 25 analysts polled in the last 3 months, 10 are bullish on Tesla stock, 7 remain sidelined, while 8 are bearish on the stock. With a return potential of nearly 5%, the stock’s consensus target price stands at $333.27. (See TSLA’s price targets and analyst ratings on TipRanks)