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.

Oppenheimer Still Sees 40% Upside for Tesla (TSLA) Stock

It’s that time again for Tesla (TSLA).

The struggling electric carmaker is expected to release earnings on April 24th, coming off what has been an extremely rough three months. Shares are down nearly 20% year-to-date, as pricing and demand remain a key challenge for the company. Just a few weeks ago, Tesla reported a massive drop in production and deliveries (45% and 31%, respectively, q/q), as sales of the luxury and high-margins Models X and Y both slipped big.

However, even with the concern, Oppenheimer analyst Colin Rusch is maintaining his Outperform rating and $437 price target on the stock, which implies about 40% upside from current levels. (To watch Rusch’s track record, click here)

Ahead of the release, Rusch is lowering gross margins estimates on “lighter mix of Model S due to an expected refresh cycle and Model 3 volumes likely coming at slightly lower prices throughout 2019.” 

Beyond margins, Rusch continues to believe “TSLA’s operating system is a critical driver of cost reduction and remains several years ahead of competitor designs.” He also believes, “broadbased demand continues to exist for TSLA’s products at prices above vehicles in the same class, but note channel strategy changes are confusing customers and creating an unnecessary headwind.”

More broadly, Rush says Tesla’s China strategy is “tocritical for the company on both cost and vehicle demand.” The analyst is expecting the company to provide further details of its battery supply arrangement, potentially additional financing for capex, and expectations for sell-through in the market. Supported by strong registrations in the EU,” the analyst believes “China will be at the center of bullish arguments.”

Overall, Rusch is lowering his estimates but is still a believer in the company’s long-term story. He says updates to “estimates to reflect 1Q shipments and our outlook for deliveries for the remainder of 2019” is bringing revenue and EPS down to $26.5B and $1.93 (respectively), from $28.3B and $6.78.

All in all, Tesla’s chart shows the stock could surge or plummet by the day, as “good news” is viewed as a game-changer, while “bad news” is seen as the end of the world. And with that, the analyst community is heavily divided: TipRanks analysis of 25 analyst shows a Hold consensus, with nine analysts say Buy, six suggest Hold and ten recommend Sell. The consensus price target stand at $302.09, suggesting shares are undervalued by as much as 10%. (See TSLA’s price targets and analyst ratings on TipRanks)

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