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.

Tesla (TSLA): Is the Worst Over? This Analyst Doubt It


It sounds like a broken record, but it isn’t: Tesla (TSLA) got some more bad news.

By now, many investors know the electric automaker reported very poor first-quarter production and delivery numbers, including a 45% q/q decrease in production and 31% q/q decline in deliveries. But what’s irking investors now (and what sent its stock down more than 3% at one pint Thursday) is Panasonic’s suspension of plans to grow Tesla’s Gigafactory 1, reportedly citing a “demand” issue.

On the news, Needham analyst Rajvindra Gill is maintaining his Underperform rating on the stock, without suggesting a price target. (To watch Gill’s track record, click here)

The Tesla-Panasonic relationship goes back to 2009, when the latter began supplying the former with battery cells. It was expected for production to rise by 50% by 2020, but Gill says Panasonic “decided to freeze this expansion due to concerns regarding demand for Tesla vehicles,” as per a Nikkei report. Gill also believes “Panasonic will “suspend its previously planned investment in Tesla’s integrated automotive battery and EV plant in Shanghai.”

For Gill, this question of demand doesn’t come as a surprise. He says, “concerns of weakened demand for Tesla vehicles, particularly for the Model 3, have long been voiced by us and many others on the street. Several key factors contributing to demand concerns are the phasing out of tax subsidies for TSLA’s vehicles, TSLA’s previously indicated reliance on international sales of the Model 3 to make a profit, and recent sales slump.”

The analyst concluded, “[…] we question whether the company will be able to achieve its 360-420k delivery target. Also, much of Tesla’s demand roadmap is dependent on penetration into the China EV market. With Panasonic suspending its planned investment in the Shanghai automotive factor, according to the Nikkei report, we wonder if Tesla will have the supply / capacity to meet demand, and if there’s enough demand for Tesla’s cars to begin with given the intense competition in that market.”

Tesla’s rocky 2018 has carried over to the first three months of the new year. Last year, the company faced numerous challenges — ranging from production, demand and pricing to CEO Elon Musk’s squabble with the SEC. As soon as one challenge was overcame — and stock confidence increased — suddenly another challenge came up. The company’s 2018 up-and-down stock chart — which rose or fell 10% more than a dozen times — shows Tesla’s inconsistency. While the company is one of the most well-known and loved by investors, it is also among the most scrutinized, which makes for a hit-or-miss chart.

While there is little agreement on what to do with Tesla stock, there is agreement among the analyst community on one thing: You wouldn’t be crazy if you invested — or didn’t invest — in Tesla. TipRanks analysis of 25 analyst shows a Hold consensus, with nine analysts say Buy, six say Hold and ten recommend Sell. The average price target among these analysts stand at $297.33, suggesting the stock can rise about 10% from current levels. (See TSLA’s price targets and analyst ratings on TipRanks)

 

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