Demand For Tesla Motors Inc Model S In The U.S. Is ‘Plateauing’ [REPORT]

Tesla stockBlomst / Pixabay

Initial demand for Tesla Motors Inc (NASDAQ:TSLA)’s Model S sedan in China is strong, with four to five months’ wait time for delivery. Analysts at Barclays Equity Research believe that more incremental demand for the electric car will come from Chinese consumers by the end of the year.

Increased competition

In a note to investors, Barclays Equity Research analyst Brian A. Johnson and his colleagues say that Tesla Motors Inc (NASDAQ:TSLA) is facing some near-term momentum challenges, particularly in the United States. According to them, the Model S is facing increased competition from Bayerische Motoren Werke AG (ETR:BMW), and they believe that demand for the electric vehicle is “plateauing.”

Johnson noted that Tesla Motors Inc (NASDAQ:TSLA) management tried to “quash fears” that demand for the Model S in the United States was modest by stating that the number of orders for the electric vehicle increased by 10% sequentially in the first quarter. The company also emphasized that Model S deliveries are still production-constrained.

2Q guidance put Tesla stock in ‘penalty box’

The analysts also say the guidance provided by Tesla Motors Inc (NASDAQ:TSLA) was disappointing and puts the company’s shares in the “penalty box” in the near-term. Johnson said, “Whereas investors had grown accustomed to Tesla providing delivery guidance ahead of expectations, the trend was broken for 2Q, as deliveries were guided to 7,500 units, below our in-going estimate of ~7,800.”

In addition, Johnson noted that Tesla Motors Inc (NASDAQ:TSLA) expected its second quarter to be “marginally profitable,” compared with the 27 cent per share consensus estimate.

Positive observations

Johnson also said one of the positive developments reported was that Tesla Motors Inc (NASDAQ:TSLA)’s first quarter earnings of 12 cents per share beat the consensus estimate. However, that was still below his 16 cent per share estimate.

According to the analyst, management also minimized uncertainties regarding its partnership with Panasonic Corporation (TYO:6752) after signing a letter a letter of intent to partner on its gigafactory. Tesla Motors Inc (NASDAQ:TSLA) CEO Elon Musk also emphasized his confidence that the electric car manufacturer will achieve 30% reduction in battery cost per kwh, and was cautiously optimistic that it will exceed the 30% target.

Furthermore, Johnson observed that Tesla Motors Inc (NASDAQ:TSLA) continues to achieve cost reductions as it maintained its gross margin guidance of 28% by the fourth quarter. The company also plans to switch its production line in the third quarter to reduce labor and overhead costs, and it will benefit from increased automation and more optimal manufacturing.

Jonson maintained his Equal-Weight rating and $220 price target for shares of Tesla Motors Inc (NASDAQ:TSLA).

Tesla stock tumbles 10%

The stock price of the company is down by almost 10% to $181.20 per share at the time of this writing around 2:26 P.M. in New York on Thursday. Over the past 52 weeks, Tesla Motors Inc (NASDAQ:TSLA)’s stock price reached as high as $265 per share. Investors have been selling off their stakes in momentum stocks, including Tesla Motors, and Prem Watsa previously warned about a new bubble in the tech industry. The current decline was primarily caused by its disappointing 2Q guidance.

A separate report from an equity risk management firm indicates that shares of Tesla Motors Inc (NASDAQ:TSLA) are currently at an elevated risk and issued an exit trigger to investors.

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About the Author

Marie Cabural
Marie received her Bachelors Degree in Mass Communication from New Era University. She is a former news writer and program producer for Nation Broadcasting Corporation (NBC-DZAR 1026), a nationwide AM radio station. She was also involved in events management. Marie was also a former Young Ambassador of Goodwill during the 26th Ship for Southeast Asian Youth Program (SSEAYP). She loves to read, travel and take photographs. She considers gardening a therapy.

18 Comments on "Demand For Tesla Motors Inc Model S In The U.S. Is ‘Plateauing’ [REPORT]"

  1. The problem is Joe the people never seem to get a chance to decide, the politicians decide for them and they will have the nerve to say that they are representing our best interests…..BS, they are deciding on the companies best interest not ours. How can they get away with that?
    Well you saw how the auto dealers lobbyists in NJ bought the decision to take away Tesla’s right to sell their cars without a car dealer, right??
    You might ask what’s wrong with this picture?
    In my opinion—It’s all about big bucks my friend, it’s all about big bucks, and our FREE MARKET doesn’t work in NJ and other States where these car dealers are buying loyalty, it probably works the same way in California with your case, but I live on the opposite end of the country, so I’m not familiar with that case.

  2. CNG and LPG are indeed strong competitors for heavy duty vehicles which diesel usually reins. The lower costs are very attractive.

    Hydrogen will likely fail at capturing the passenger (Light Duty) fleet in the US… and be relegated to niche submarkets competing with the likes of CNG.

  3. You should look into the facts on the HD uptake of CNG there are over 40k HD applications running in the USA now, most are transit buses, refuse trucks and school buses. Cummins had just released the CNG motor large enough for over the road trucks. These are being used by large ans small fleets such as fedex, ups and others.

  4. the problem is that the oil companies are not exactly playing fair. There is crony capitalism going on… where millions of dollars in grant money is being spent right now, to pay for 80% of the costs for H2 stations in California. Those stations will sit empty for years, being a waste of money. At $2,125,000 worth of grant money for EACH station… that is a lot of money.
    This is not an even fight of, “just let the people decide” since so much taxpayer money is being used up at the direction of the Hydrogen lobbyists.

  5. What if they do? So what, the point is they want to sell more oil, it’s the fuel of their choice, and not ours. If you think about it if you had a solar panel on your roof you could charge your EV free, and that would be the same as getting free gas, do you think the oil companies want that to happen?
    Of course not, several years ago Mr. Boone Pickens wanted Natural Gas to power 18 wheelers, they started to make special NG engines to power those rigs, but what happened? The answer is nothing, I think that after several trips to the White house and Congress the old man (Boone Pickens) gave up because the oil companies are just to powerful even for him with all of his money and American support.
    The oil companies don’t want anything to upset their revenue stream, so they wouldn’t support his ideas.
    The only chance of getting any change in this country is an American Company led by Mr. Elon Musk simply because the idea, the technology, the model cars they are building, the models coming on line soon, the giga factory coming on line soon, plus the fact that the White House and Congress is supporting what Musk and Tesla Motors is doing for American .

  6. Haha… Elon said EXACTLY how hack journalists would purposefully misunderstand the earnings report. In the Q&A, he said several times, “I know that the media is going to want to confuse this. Demand is NOT the same as Deliveries”.

    US deliveries may have slowed, but only because European and Asian deliveries have increased (not reported yet). The demand is still increasing in the US… but when a company with supply constraints wants to open up a foreign market, the number of deliveries in the domestic market must stagnate until the new market is fully open.

  7. Um… the same owners of oil reserves, also own the natural gas reserves. Shell is one of the biggest advocates of Natural gas

  8. Actually no I am sitting in a 1000 square foot hotel room in Evian France looking out at lake Geneva, why would I be jealous?

  9. Don’t you know that the oil companies don’t want you to use natural gas in your car or truck, they have to much oil all around the World for us to use and buy. After all what would these people in foreign countries sell if they couldn’t sell their oil?…..Sand??? Maybe they should pound it instead.

  10. Title of this article is an absolute LIE

  11. Jealous?

  12. The fuck? No it isn’t. They answered this question THREE times on the earnings call two days ago, and it’s in the shareholder letter. Who writes this shit?

  13. Rent it from Hertz or Enterprise but it depends on where you live.

  14. Arrogant cars from an arrogant company that are sold to arrogant silcon valley dwellers.

  15. Madame Chair: “We’ve got fewer people working today than there were in 2007 and the population has increased by 15 million,” he said. “So how is this progress? Please tell me.” Senator Jeff Sessions (R)

    My redneck friend, when on to state that stocks have risen, during this QE recovery, and that was about all.

    What really has us seeing red, is talk of charging tolls on our Interstate Highways! This is why we’ve chosen to shoot down mo mo stocks like TSLA.

    If Americans had real access to natural gas, affordable NGV vehicles could reach more of our National Parks, while contributing to road maintenance. Electric cars are slipping through the cracks, in our highway system.

    People would drive more and further on natural gas, and that is what makes more sense. than the cult obsession with Tesla Motors Inc.

    See the USA in a Chevrolet…Cadillac!

  16. Not true: Tesla has grabbed more sales in the US in the prestigious class of premium sedans than BMW, Audi, Jaguar and Porsche with their respective offerings in that price and performance range, outselling them in their first year of production. This market only represents a small percentage of the whole auto market and they have not even started marketing yet.

    In many states of the US there is quite some upside potential, but they rather serve their new markets (right-hand-drive markets, China) first, before they start to push further in the US.
    Model X already has more than 10.000 reservation holders – without any information on price or details to to vehicle. And they already archive one of the highest gross margins on their cars in the whole industry.

    There is absolutely nothing to worry about when I think of Tesla. In fact, I believe that we have only seen about 1% of the companies potential yet.

  17. Dead on Michael. Tesla pretty much reported exactly what they predicted for the quarter. You’ve got to love analysts though. They raise their target when a stock is going up and lower it when it starts going down. Heck, my 92 year old grandmother can do that. Want to impress me? Move your target price BEFORE the market moves the stock – then I will be impressed. These guys are idiots. Even the questions they asked in the CC were idiotic.

  18. Michael Gibson | May 9, 2014, 6:42 am at 6:42 am |

    All you people come out with all the negative reporting when the stock is heading down, when days ago you are pumping it up. You analyst are just as corrupt as the market

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