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"INCREASINGLY CONCERNED"

The harshest things Wall Street analysts are saying about Tesla

REUTERS/Aly Song
Tesla’s gigafactory.
  • Alison Griswold
By Alison Griswold

Reporter

Tesla could do with some acceleration.

On April 3, the electric carmaker reported an epic miss on vehicle production and deliveries for the first quarter of 2019. Tesla said it delivered roughly 63,000 cars—50,900 Model 3 and 12,100 Model S and X in the quarter. That was up year-over-year, but down 31% from deliveries in the fourth quarter of 2018. Analysts had expected deliveries of 76,000. The company said it produced 77,100 vehicles in the first quarter, compared to 86,555 in the fourth quarter of 2018, with production of the high-end Model S and X suffering most acutely. Tesla attributed low delivery numbers partly to a “massive increase” in deliveries in Europe and China, and the “many challenges encountered for the first time” in fulfilling them.

If the numbers themselves weren’t bad enough, Tesla also said the miss would hit its bottom line. “Because of the lower than expected delivery volumes and several pricing adjustments, we expect Q1 net income to be negatively impacted,” the company said in a statement. “Even so, we ended the quarter with sufficient cash on hand.”

Tesla’s stock dropped 8% the day after it reported those first-quarter numbers. Analysts have not been kind to the company in the week since.

“Tesla continues to struggle as a ‘real car company,’ with demand collapsing for the tired Model S/X platforms and higher priced versions of the Model 3,” Jeff Osborn, an analyst at Cowen, wrote in a research note April 4.

Morgan Stanley autos analyst Adam Jonas yesterday cut his price target on Tesla from $260 to $240. “We are increasingly concerned about the impact that investor concerns over Tesla’s financial strength and forward-looking liquidity position could potentially have on employee morale, customer perceptions and standing with key stakeholders and suppliers,” he wrote in a note to clients.

Investment bank Baird’s equity research team maintained their “outperform” rating on the stock but noted the miss on deliveries and its potential impact on cash flow. The team also said Tesla’s cash flow could be hurt by the first quarter having ended on a Sunday, making it harder for the company to collect cash from banks financing loans to customers. Baird research analyst Ben Kallo said in late March—before Tesla reported first quarter deliveries—that he felt weak deliveries were already “priced into the stock,” and the quarterly results could help to temper expectations going forward.

The slowed production and deliveries aren’t necessarily specific to Tesla. Auto sales broadly are skidding to to their slowest pace in more than four years, according to industry research firm J.D. Power.

Tesla’s April 3 report also failed to provide an update on the $35,000 Model 3 that its most ardent fans have spent years waiting for. In late March, customers complained online that Tesla had contacted them about delays to their Model 3 orders, and offered to sell them a more expensive version of the car that it said could arrive sooner instead. These “upselling” tactics are typical of traditional auto dealers, but left a bad taste in the mouths of consumers who expected more from Tesla and the luxury brand it has cultivated.

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