Tesla’s (TSLA) Profitability Is Still a Concern, Says RBC Capital; Remains Sidelined on the Stock

Tesla (TSLA) has had a difficult year, rife with production problems for its flagship vehicles and self-inflicted scandals from CEO Elon Musk. However, not everything is so bleak. Tesla announced on Tuesday it produced 80,142 vehicles in the third-quarter. That’s a 50% more than the prior all-time high in Q2. Q3 deliveries totaled 83,500 vehicles, beating both the company’s forecasts and analysts’ expectations.

However, RBC Capital analyst Joseph Spak is still concerned about the company’s profitability and, as such, reiterates a Sector Perform rating on TSLA, with a price target of $315, which represents a slight upside from current levels. (To watch Spak’s track record, click here)

Spak wrote, “No color on financial performance, profitability or Model 3 net reservations. Last quarter, Tesla took the step to reaffirm their guidance for positive GAAP net income and cash flow in Q3 and Q4. This release omitted any commentary on financial guidance (only S/X delivery guidance) though that is a return to what the company has historically done. As we update our model for 3Q18 deliveries, our 3Q18 non-GAAP EPS goes to $0.14 from $0.02. However, we still have a difficult time seeing GAAP profitability in the quarter. Further, last quarter Tesla indicated that net Model 3 reservations at end of Q2 stood at 420k. No disclosure this time, though company highlighted that this is significant opportunity to grow M3 addressable market via leasing, lower-price variants and international. Bears may interpret this commentary that Tesla has gone through higher-end US M3 demand.”

Net net, Wall Street believes Spak is smart to play it safe when it comes to the electric car maker’s prospects ahead, as TipRanks analytics reveal TSLA as a Hold. Out of 27 analysts polled in the last 3 months, 7 are bullish on Tesla stock, while 10 remain sidelined and 10 are bearish. With a slight upside potential, the stock’s consensus target price stands at $319.14. (See TSLA’s price targets and analyst ratings on TipRanks)


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