Tesla Motors’ status as a darling of Wall Street is slipping, with UBS becoming the third investment bank this month to downgrade the EV maker. UBS analyst Colin Langan, who expects the firm’s car and home battery sales growth to disappoint, slashed his rating on Tesla from Neutral to Sell.
Stock rising on expectations, not on facts
A few months back Tesla unveiled Tesla Energy, which is intended serve homes and offices with power backup. The EV maker received orders of more than $800 million in the first five days.
It's no secret that this year has been a volatile one for the markets. The S&P 500 is down 18% year to date, while the Nasdaq Composite is off by 27% year to date. Meanwhile, the VIX, a key measure of volatility, is up 49% year to date at 24.72. However, it has spiked as Read More
“However, this pace is misleading as customers did not put down deposits, so these are just solicitations of interest,” said Langan.
Langan is of the view that Tesla stock has already factored in the deliveries of over 1.5 million vehicles in 10 years, and the full utilization of the company’s battery capacity, which the analyst believes is unlikely. The analyst notes the EV maker will start to add up inventory in the next 10 years as the demand for its cars loses steam.
UBS lowered its earning estimates for the company for the year 2015 and 2016. Reasons cited are rising R&D and general operating costs owing to heavy spending on the Model 3 and the battery business. Langan slashed his price target to $210 from $220.
Should Tesla investors be worried?
Earlier this month, both Deutsche Bank and Pacific Crest downgraded Tesla citing concerns over its valuation. Deutsche Bank lowered its rating from Buy to Hold while Pacific Crest changed their rating from Overweight to S