Tesla Motors stock pulled back today after initially rising following last night’s earnings report as reality started to sink in. Management said on last night’s earnings call that they must raise capital because they have moved up their goal to make 500,000 vehicles per year to 2018, which is two years earlier than previously planned.
Price target increases for Tesla Motors
Both bulls and bears upped their price targets for Tesla, but the fact is that there’s still lots of talk and lots of execution risk. In fact, Barclays analysts are calling the company “more of a cash-hungry start-up unicorn than a traditional public company.”
Tesla Motors posted adjusted losses of 57 cents per share, which was a penny better than consensus, on $1.6 billion in revenue, which was in line with consensus. The automaker delivered 14,810 vehicles during the first quarter, which came up short of the guide but was no surprise because this was revealed earlier. Management guided for about 17,000 deliveries in the second quarter, however, which Barclays said is short of consensus by 2,500. Baird noted though that the guide for 20,000 vehicles being produced was better than expected.
Tesla’s ability to deliver up for debate
JPMorgan analysts Ryan Brinkman and Samik Chatterjee raised their price target from $170 to $185 per share but maintained their Underweight rating on Tesla Motors stock. One of their biggest concerns was that the automaker doubled down on its “already extraordinarily ambitious targets” by moving the goal of producing 500,000 vehicles per year two years sooner. Further, the automaker aims to produce 100,000 to 200,000 Model 3 cars in the second half of next year, which is also extremely ambitious. The JPMorgan team doesn’t think these targets are achievable.
Baird analysts Ben Kallo and Tyler Frank upped their price target from $300 to $338 and reiterated their Outperform rating on Tesla, noting that management reported that they had solved most of their production problems and expects to be able to produce about 2,000 vehicles per week during the second quarter.
Tesla to raise capital soon
Barclays analyst Brian Johnson had already predicted before last night’s earnings call that would only be a matter of time before Tesla announced another capital raise. His prediction turned out to be correct, but possibly only because the automaker moved the timeline to accommodate the deluge of Model 3 orders they’ve received since unveiling the car.
Johnson, who has a $165 price target and Underweight rating on Tesla, noted that the automaker has been beset by manufacturing problems since the Model S, and he expects this to continue. He also questions how profitable the EV manufacturer can be on the Model 3, as even assuming that the mass market car’s orders all convert to sales, he doesn’t see the gross margin target as being achievable. He doesn’t believe Tesla can reach its battery cost targets either, especially now that the timeline has been moved up.
Is Tesla setting itself up for a fall?
UBS analyst Colin Langan also raised his target for Tesla from $140 to $160 but maintained his Sell rating, questioning whether the new timeframe is only setting investors up for disappointment. He noted that the Model X ramp has gone slowly and that the vice president of manufacturing is leaving. Langan estimates that Tesla will need about $2 billion to fund the early ramp of the Model 3 production.
His concerns are similar to those of Johnson, as he questions whether the Model 3 can make money and whether Tesla will be able to pull off its ambitious targets.
Tesla Motors shares slipped 4.4% to $212.76 during regular trading hours on Thursday.