Will Tesla’s (TSLA) Tale of Two Guidances Weigh on Stock?


Among the most polarizing stocks on Wall Street is one of it’s most famous — Tesla (TSLA). Since the beginning of last year, shares have climbed or dropped at least 10% more than a dozen times, as some in the investment community look at the stock as a can’t-lose, with others thinking there’s no chance the company won’t fail. Though the company’s products are raved about and selling relatively well, internal struggles rein supreme, with, among others, the SEC-Elon Musk fight, as well as production challenges that have been one of investors’ most pressing concern over the past few years.

Right now, the bears are winning out — Tesla shares are trading nearly 20% lower year-to-date. Barclays analyst Brian Johnson expects this to continue. The analyst rates the company as Underweight (i.e. Sell) with a $192 price target, which implies about 30% downside for the stock. (To watch Johnson’s track record, click here)

Johnson believes that “parallel universe theory may explain Tesla conflicting guidance,” as the company has conflicting reports on its future. For example, Johnson says in the regulatory “universe” the company expects between 360-400k deliveries annually, while in CEO Musk’s universe (“oral comments, tweets and court filings”), expected deliveries go as high as 600k cars.

This is troubling for the analyst because it implies a very wide revenue guidance. The difference between the low-end of the regulatory universe and high-end of Musk’s universe is 240k vehicles, and translates to a revenue range of $22.5 billion to $35 billion, according to Johnson. Given such a range, this could scare many in Wall Street who view this “as a material difference,” Johnson says.

Revenue alone isn’t concerning Johnson. Production costs also differ greatly based on the number of vehicles delivered. For example, the analyst says, “if the second universe is interpreted as still only having 400k deliveries, Model 3 inventory build would be 200k units costing ~$8bn of cash drain.” While Johnson’s “delivery estimate moves up,” he still models for payback.

Many sees Tesla’s war not only as one with the competition, but with itself — and it’s wide-ranging guidance only proves this further. The fact that there is no consensus on where the company sees itself in a year shows many that Tesla cannot get itself organized internally, which is cause for concern. And unfortunately, this isn’t the first time the company has showed its skeletons.

All in all, TipRanks analysis of 24 analyst illustrates the polarization on Tesla’s stock. Based on the analysts’ ratings, there is a Moderate Buy consensus, with nine analysts suggest Buy, six say Hold and another nine recommend Sell. The price target among these analysts stand at $325.45, representing a 25% increase from current levels. (See TSLA’s price targets and analyst ratings on TipRanks)

 

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