Tesla Motors Inc (NASDAQ:TSLA) missed guidance again for second quarter deliveries and looks on track to miss the earlier guide for the full year. As a result, analysts are becoming even more concerned, and another firm has cut its price target for the automaker’s stock, warning that at some point, investors will start expecting a major delay in the Model 3 ramp. Nonetheless, battery maker Panasonic is confident in Tesla as a client and in fact is speeding up investments related to the gigafactory and Model 3 ramp.
Tesla price target to $210
In a report dated July 7, RBC Capital Markets analyst Joseph Spak said he trimmed his price target and estimates for Tesla following the announcement that second-quarter deliveries had come up short of expectations. His price target falls from $220 to $210 per share, but he maintained his Sector Perform rating on the automaker.
The analyst said they’re now taking “a more prudent approach to forward deliveries.” He is now forecasting losses of 86 cents per share for the second quarter, a significant reduction from the 31 cents per share in losses he was projecting earlier. For the full year, he now expects losses of 73 cents per share, whereas he was projecting profits of 30 cents per share previously. He’s projecting 75,000 vehicle deliveries for this year, compared to his previous estimate of 79,000. Tesla must delivery about 50,000 vehicles in the second half of the year just to hit the low end of its guide for between 80,000 and 90,000 deliveries this year.
Tesla delivered 14,370 vehicles during the second quarter, missing management’s guide of 17,000 and the consensus of 17,330 vehicles. The automaker delivered 9,745 Model S sedans and 4,625 Model X SUVs, compared to Spak’s expectations for 12,500 and 4,500, respectively. The company had 5,150 vehicles in transit at the end of the quarter, which was more than expected and thus accounts for some of the miss.
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Where’s the tipping point for Tesla?
Of course Tesla bulls remain enthusiastic even though the company keeps missing expectations. While some bulls are finally starting to dial back their enthusiasm, others, such as Global Equities Research analyst Trip Chowdhry, remain just as bullish as ever. His $385 price target is one of the highest on Wall Street.
In a research note this week, he pointed out that Tesla still holds a very interesting distinction over other automakers in that it spends very little on marketing. He said the electric vehicle maker spends only $6 per car sold on advertising. Meanwhile other automakers spend between $248 and $3,325 per car sold to market their vehicles. He explained that $6 of ad spend per vehicle generates more than $8 billion in sales and more than $14 billion in bookings, which he added “is unheard of in the industry,” reports Benzinga.
Spak, however, warns in his report that Tesla will likely reach a point where credibility is a problem, and although we’re nearing that point, bulls like Chowdhry demonstrate that we’re not there yet. Spak states that the market might not care about the short-term problems as long as the opportunities in the mid-to-long term remain the same. However, he adds that there might be a tipping point somewhere.
He said if Tesla keeps missing targets, Wall Street’s confidence in the Model 3 ramp may finally be shaken. He notes that already most investors don’t expect Tesla to be able to hit its target of 500,000 cars per year by 2018 but adds that as the negative data points pile up, investors might push out the Model 3 ramp in their models.
Panasonic banking on Tesla’s Model 3
Battery supplier Panasonic appears undeterred by Tesla’s production problems, however, and appears to be betting on the Model 3 ramp going as quickly as planned. According to The Wall Street Journal, Panasonic executive Kenji Tamura told reporters today that they are installing machinery at Tesla’s gigafactory right now. The Japanese battery maker is the exclusive battery supplier for the facility, for which it is partnering with the EV maker.
In fact, Tamura said that they are speeding up their $1.6 billion investment in the gigafactory due to the better-than-expected demand for the Model 3. He expects sales from Panasonic’s car battery business will reach $4 billion (¥400 billion) by the fiscal year that ends in March 2019. For comparison, the company recorded ¥180 billion in car battery sales in the fiscal year that ended in March 2016.
Tesla shares edged higher 0.49% to $217 during morning trades on Friday.