Tesla Motors Inc (TSLA) Tumbles On UBS Downgrade

Tesla stockBlomst / Pixabay

Tesla shares fell 4.75% in early trading Tuesday after UBS analyst Colin Langan downgraded the stock from Neutral to Sell. UBS has become the third investment bank to downgrade Tesla this month. On July 9, Pacific Crest had downgraded the stock from Overweight to Sector weight. A day later, Deutsche Bank cut its rating from Buy to Hold, citing sky high valuations.

Tesla’s Powerwall orders figure ‘misleading’

UBS also slashed its 12-month price target from $220 to $210. Colin Langan believes that the electric vehicle maker’s home battery and car sales growth both would disappoint. Tesla launched its home energy storage solution Powerwall on May 1. UBS said the stock’s current valuations have priced in full utilization of Tesla Motors Inc (NASDAQ:TSLA)’s storage capacity and more than 1.5 million annual vehicle deliveries by 2025.

Tesla

In May, Tesla Motors Inc (NASDAQ:TSLA) claimed that it had received orders worth $800 million within five days of announcing Powerwall. UBS says the claim was “misleading as customers did not put down deposits.” These were just solicitations of interest, so not all of that is going to turn into actual sales. What’s more, the initial orders were driven up by early adopters. Once these orders are filled, Tesla will find it difficult to make the mass market leap.

Can Tesla meet its energy storage target?

The Palo Alto-based EV maker has planned 15GWh of storage capacity by 2020. Langan believes that Tesla Motors Inc (NASDAQ:TSLA)’s planned capacity may be much bigger than the market itself by 2020. He estimates market demand of just 3.2GW within five years, much lower than the consensus estimate of 7.2GW. Colin Langan argues that even if the consensus estimate turns out to be correct, Tesla will need at least 75% market share to fully utilize its 15GWh capacity. There is plenty of room for new technology and entrants to erode Tesla’s early mover advantage.

Langan also slashed his 2015 EPS estimate from $1 to $0.20, citing an increase in R&D and operating costs due to investment in the battery business and Model 3.

Tesla Motors Inc (NASDAQ:TSLA) shares were down 5.15% to $267.71 at 11:03 AM EDT on Tuesday.

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About the Author

Vikas Shukla
Vikas Shukla has a strong interest in business, finance, and technology. He writes regularly on these topics. - He can be contacted by email at vshukla@valuewalk.com or on Twitter @VikShukla10

3 Comments on "Tesla Motors Inc (TSLA) Tumbles On UBS Downgrade"

  1. The ‘shorts’ are so desperate that they are doing a barrage of negative articles so fast there is no real discussion. this doesn’t even show up anymore under google finance tesla news. There is really nothing new to this ‘news’. Just another negative opinion without basis.

  2. geoffrey bailey | Jul 21, 2015, 1:12 pm at 1:12 pm |

    The UBS analyst must have missed the story about a winery in California that spent a little over $200,000 for the Tesla battery packs and saved $200,000 a year in electricity by shifting the load from solar panels to battery to grid and only drawing off the grid during non-peak prices. Utility companies can buy these batteries instead of building excess capacity that they only use several hours a day. Oh, and Tesla stopped taking battery orders because they are so overbooked. Buy, buy, buy!

  3. It’s an opinion. Nothing more. While there is some interesting analysis the story will play out much differently. This ‘car’ is more of an electronic device and the demand is more than estimated. How that will play out is hard to say. But Tesla does have the early move advantage and if someone else was building the facilities to compete we would hear about it…which we have not. So no serious to scale competition yet or even foreseen. Simply not enough reason for the current money makers to take this change, expense and risk yet. BYD is a possibility but more so for China. They have more than enough demand in China to use up any capacity they create.

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