Tesla Stock Falls Following Quarterly Delivery Numbers and Price Cut

Shares of electric auto maker Tesla (ticker: TLSA) experienced another decline on Thursday, following the company’s release of quarterly delivery numbers and a disappointing price cut.

Tesla stock closed down 3% on Thursday, reaching nearly $300 per share and marking a nearly 10% decrease for the year so far.

Analyst Comments

Several analysts have commented on the situation since the announcement was made on Wednesday. The average analyst estimate for Tesla’s stock, according to FactSet, is around $337. Here are some highlights from their interpretations of the new company data:

Macquarie’s Maynard Um

Maintaining a target price of $430 and an Outperform rating, Maynard Um of Macquarie raised fourth-quarter revenue and earnings estimates due to higher-than-projected Model 3 production numbers.

Um believes that concerns over near-term U.S. demand will persist until international demand proves itself. He sees the first quarter as a transitional period between the phasing out of a U.S. tax credit and the anticipated growth from increased shipments to foreign markets.

“We believe expectations have reset lower and think a series of profitable earnings/cash flow quarters can drive shares higher,” Um wrote.

Deutsche Bank’s Emmanuel Rosner

Emmanuel Rosner of Deutsche Bank maintained a Hold rating and a price target of $375. While he acknowledges Tesla’s industry-leading battery design and cost, Rosner believes that competition in other areas could pose a longer-term challenge.

Rosner expects competition to primarily target the premium end of the market until 2020/21. As a result, he believes the Model 3 will remain in a league of its own until at least mid-2020.

Reimagining Tesla’s Stock Potential and Concerns

As Tesla’s Model 3 pipeline approaches its saturation point, concerns arise regarding the stock’s potential downward adjustment. Two factors contribute to this worry: the emergence of competition in the electric vehicle market and the perceived lag in Tesla’s autonomous technology. These concerns have analysts reevaluating their predictions.

Jed Dorsheimer: Maintaining Caution

Canaccord Genuity analyst Jed Dorsheimer remains cautious with a Hold rating and a $323 price target. However, due to recent developments, his estimates are currently under review. Dorsheimer believes two key concerns trouble investors. Firstly, the potential for a dip in demand during the first quarter, resulting from the pull-forward effect caused by the reduction in tax credits on January 1, 2019, from $7,500 to $3,750. Secondly, doubts surrounding the ability to scale up Model 3 production capacity at a rapid pace.

Romit Shah: Analyzing Price Cuts

Nomura Instinet’s Romit Shah maintains a $300 target price and a Neutral rating but revises projected profits based on recent price cuts. Shah suggests that historically, subsidy reductions tend to create temporary headwinds in regional demand. However, this new price cut might alleviate the impact, slightly softening the blow.

Ryan Brinkman: Lowering Expectations

JP Morgan’s Ryan Brinkman holds an Underweight rating on Tesla’s stock and adjusts his price target from $225 to $220. Brinkman also downgrades fourth-quarter estimates. He explains that Tesla’s decision to lower prices could indicate softer underlying demand, potentially hindering the company’s ability to achieve its targeted strong gross margin of 25% on the already lower-priced Model 3. This has influenced Brinkman’s overall conservatism.

With these concerns and revised predictions, Tesla faces critical scrutiny from investors and analysts alike. The next moves and market reactions will undoubtedly shape the company’s future.

Tesla Faces Challenges with Tax Credit Phase Out

According to Jessica Caldwell, the executive director of industry analysis at Edmunds, the recent reduction in tax credits for Tesla vehicles has led to a significant increase in their price tag. While owning a Tesla still holds a certain level of appeal, price considerations are paramount for most car buyers. Overnight, the cost of purchasing a Tesla has gone up by thousands of dollars.

Caldwell acknowledges that finding the right balance between production, demand, and price has always been a challenge for automakers. Despite the alarming nature of the situation for Tesla, this is a common problem faced by the entire industry.

On the other hand, Rajvindra Gill from Needham maintains an Underperform rating on Tesla stock. Given the uncertain demand environment, affected by consumer spending and macro/tariff concerns, Gill expresses caution about holding stocks that have high leverage and lack cash flow. With declining volume, lower margins, debt repayment obligations, and a high valuation, Tesla finds itself in a particularly vulnerable position.

Overall, Tesla is grappling with the impact of reduced tax credits while also facing a challenging market environment. It remains to be seen how the company will navigate these obstacles and maintain its position in the industry.