Tesla Motors Inc (NASDAQ:TSLA) has been making headlines every day in recent weeks. This week it was about the company repaying its Department of Energy loan nine years early. The company’s stock rose 6 percent during the regular trading day on Thursday. While some analysts, like those at Morgan Stanley, are quite bullish on Tesla, of course there are others who aren’t.
Analysts John Lovallo II and John Murphy of Bank of America Merrill Lynch released a report to investors this week explaining why they’re not so bullish on the company. They lowered their estimates for the company based on its recent adoption of lease accounting, which will change how it reports results starting in the near future.
The Impact Of Lease Accounting On Tesla
The company’s revenue from financed vehicles will be amortized over 36 months rather than being listed completely by the company when it delivers the vehicles. This accounting change will have a negative impact on Tesla Motors Inc (NASDAQ:TSLA) in the near term, but it shouldn’t affect the company’s cash flow.
Lovallo III and Murphy said as a result of this change, they lowered their 2013 estimated earnings per share from 56 cents to 7 cents. They also lowered their estimate for 2014 from $1.91 to $1.25 and for 2015 from $2.23 to $1.80.
Why BAML Is Still Bullish On Tesla Motors
The analysts said they’re basing their investment thesis for Tesla Motors Inc (NASDAQ:TSLA) on what they view as its expected performance in 2015. They admit that the auto-maker has “made notable progress and appears more likely to be viable,” but they still think the company’s stock is overvalued. They believe that even though their view may be wrong in the near term, it’s correct in the long term.
Their price objective for Tesla is $39 per share, and their rating for the stock is underweight.
Tesla Vs. Chrysler
On a side note, Tesla’s early loan repayment also continues to make headlines. CEO Elon Musk traded barbs with Fiat SpA (PINK:FIATY) (BIT:F) on Thursday over Tesla Motors Inc (NASDAQ:TSLA)’s repayment of the loan. Tesla had said it was the only U.S. company to completely pay back the government loan, but Fiat SpA (PINK:FIATY) (BIT:F) CEO Sergio Marchionne said that Chrysler, of which is now majority owned by Fiat, paid back $7.6 billion to the government in 2011.
However, Musk took to Twitter to defend Tesla Motors Inc (NASDAQ:TSLA)’s claim, saying that Chrysler can no longer be considered a U.S. automaker because it’s majority owned by Fiat, which is an Italian automaker. He also said that Chrysler did not pay back $1.3 billion of its bailout to the government.
Chrysler actually received its funds the same year as Tesla Motors Inc (NASDAQ:TSLA). According to Washington Post reporter Deepa Seetharaman, Chrysler received $12.5 billion as part of a government plan to prevent its collapse.
However, the company was split into two companies, with the positive assets used to form the current company that’s majority owned by Fiat and the negative assets used to form what’s known as Old Chrysler. Needless to say, the bailout loans were left to Old Chrysler, which was unable to pay them all back.