Tesla Motors Inc (NASDAQ:TSLA) has been battered and bruised lately because of media coverage surrounding the three Model S fires. CEO Elon Musk has said time and again that it’s unfair because of how much more common fires are in gasoline cars than in Tesla’s vehicles. Nonetheless, Barclays analysts believe the company will take a sales hit because of the media coverage. As a result, they cut their demand forecast and price target for Tesla.
Tesla Coverage May Be Unfair, but It May Affect Sales
Analysts Brian A. Johnson, Steven Hempel and Dan Levy agree that the numbers suggest the reports about the Model S fire are overblown. However, they say history shows that Tesla Motors Inc (NASDAQ:TSLA) will likely see an impact on its sales growth. As a result, they cut their
They point to other automakers with “highly publicized investigations/recalls/media scares.” Audi had one in the 1980s, and then Toyota had another in 2010. The analyst team said these past incidents showed that sales could take a 10 to 20% hit, even if the allegations end up being unfounded.
Investigation Could Also Impact Tesla
The National Highway Traffic Safety Administration has also opened an investigation into the Model S fires. Tesla said it requested the investigation, although the agency says the automaker did not. Nonetheless, the findings of that investigation will also have an impact on Tesla’s bottom line.
The analysts said Tesla Motors Inc (NASDAQ:TSLA) will probably be able to manage the monetary side of a recall if one occurs. They said assuming a recall of 13,000 vehicles, Tesla could have to pay around $1,000 per vehicle.
Tesla Estimates, PT Lowered
They lowered their demand forecast for the Model S and their expectations for the Generation III vehicle. The analysts cut their Model S shipment estimate for 2014 by 10% to 29,700, which brings Tesla Motors Inc (NASDAQ:TSLA)’s estimated earnings per share for the year to 80 cents from $1.06. They also pushed volume production for the Model X crossover vehicle to 2015 with just 100 units delivered in the fourth quarter of 2014. They did this because they believe Tesla will have to divert these resources to deal with the NHTSA investigation, which could last six months.
Over the longer term, they cut their Model S and Model X sales to 65,000 units from 70,000 and lowered the probability that Tesla Motors Inc (NASDAQ:TSLA) will reach success in the mass auto market. As a result of these adjustments, their price target fell to $120 from $141 a share. Unfortunately, they see further downside from their price target because of the momentum which carried Tesla shares over their previous price target. They said it’s possible the company’s stock will overshoot their price target on the downside to around $90 a share.
Barclays analysts kept their Equal-Weight rating on Tesla Motors Inc (NASDAQ:TSLA).