Tesla Motors Inc (NASDAQ:TSLA) stock appears to have stabilized—at least for now—just under $190 a share. In the wake of the automaker’s last earnings report, analysts from multiple firms have lowered their estimates. Investors have been selling off their Tesla shares, mainly because deliveries weren’t as good as expected and the June quarter guidance wasn’t as bright as they hoped.
Tesla’s guidance triggers analyst estimate cuts
In a report dated May 8, 2014, analyst Theodore R. O’Neill of Litchfield Hills Research revised his estimates for Tesla Motors Inc (NASDAQ:TSLA) lower. He expects others to do the same—and indeed they have—thus sending the stock further into a downward trend as investor sentiment shifts to the negative. In spite of his estimate reduction, however, the analyst has maintained his Buy rating and $222 per share price target on Tesla, saying he thinks investors should buy on the weakness caused by all the downward estimate revisions.
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One of the reasons Tesla Motors Inc (NASDAQ:TSLA) warned investors about the June quarter is because it expects expenses to be higher as it continues to invest in expansion and plans for the gigafactory.
What’s ahead for Tesla?
The Litchfield Hills analyst believes Tesla Motors Inc (NASDAQ:TSLA) will wow the auto industry with the design of the Model X, which the automaker is expected to show off early next year. He thinks that the crossover vehicle will be “extremely popular,” noting that it takes Tesla into the SUV market, which is rapidly growing. He also calls it a “Godsend” for parents who have small children because of the gull-wing doors, which allow parents to reach into the vehicle even in tight spaces and without having to lean forward and down to buckle their children into a car seat.
O’Neill continues to believe that Tesla Motors Inc (NASDAQ:TSLA)’s battery and electric drive technology will become an industry standard. As a result, he said that makes up “a good portion” of Tesla’s valuation.
Tesla estimates lower
He continues to expect Tesla Motors Inc (NASDAQ:TSLA) to post 53% growth in GAAP revenue and then increase that to 64% growth next year. He believes Tesla has “supplier agreements in place that call for traditional cost savings to kick in as certain volume milestones are met.” He notes that this will continue to improve Tesla’s gross profit margins.
For the June quarter, the analyst is estimating non-GAAP earnings of 22 cents per share and $551.9 million in revenue with a net margin of 4.8%. He expects non-GAAP earnings of 88 cents per share, revenue of $3.537 billion, and a net margin of 3.6% for the full year.