Jon Hadad

About the Author Jon Hadad

Jon Hadad graduated from the University of Delaware with a degree in political science. Prior to joining the Smarter Analyst team, he was an industry analyst at a New York research firm.

Should Investors Dump Tesla (TSLA) Stock? Oppenheimer Says No


After releasing disappointing first-quarter results Wednesday, Tesla (NASDAQ:TSLA) showed its rough ride has not let up.

Tesla stock is down nearly 30% since the beginning of the year, as the electric car maker has been plagued by lower demand and sales. Earlier in the month, Tesla reported sales and production volumes were down big, contributing to investor concern leading up to the earnings release (and perhaps minimizing the stock loss, as many saw it coming).

But even with the concern, Oppenheimer analyst Colin Rusch is maintaining an Outperform rating on Tesla stock, with $437 price target, which is a whopping 88% rise from current levels. (To watch Rusch’s track record, click here).

Though the Q1 report showed poor metrics, Rusch points out that Tesla posted “better than feared auto [gross margin] with a generally positive guide for 2Q19 units at 90-100K deliveries.” The analyst says bears cite a lack of demand, but retorts that “the company…is not worried about [it] as it rolls out lower priced vehicles.” Essentially, with Tesla, Rusch is looking long-term, insisting that, while these numbers are surely disappointing, demand will return as the company continues to build affordable vehicles, including the Model 3.

Another bright spot found by Rusch is Tesla’s acquisition of Maxwell’s dry electrode process. The analyst says this “has the potential to reduce battery capex and unit cost while improving power density.” The analyst calls this “critical”, as Tesla looks to continue in cost-reduction efforts, while also giving the “potential to improve cycle life as the company targets vehicles with 1M mile lifetimes critical to robotaxi profitability.”

Tesla investors have expressed concern over the company for magnitude of reasons, but recently some are concerned with its financial wellbeing. But Tesla suggested it could be open to a capital raise, which would sure up a lot of investors concerns on the financial front. Though that is to be seen, it still would not solve the challenge of pricing and demand, as well as a host of other challenges the company faces.

Looking ahead, Rusch is updating estimates for FY19, including “non-GAAP EPS of $1.85 on revenue of $27.0B (from $1.93 and $26.53B).” Also for FY2020, the analyst is lowering both his EPS and revenue targets, to $14.14 and  $31.75B, respectfully. But looking further ahead to 2021, Rusch says his “estimates are largely unchanged.”

Bottom line

Tesla’s latest earnings report showed more of the same. But as a result, many investors weren’t too surprised by the bad results, which perhaps helped save the stock from falling even further. Nevertheless, TipRanks analysis of 27 analyst shows a Hold consensus, with nine analysts saying Buy, seven suggesting Hold and 11 recommending Sell. The average price target among these analysts stand at $292.52, which represents about 25% increase from current levels. (See TSLA’s price targets and analyst ratings on TipRanks)

 

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