Today is the first trading day for Tesla’s (TSLA) stock after the automaker released its second quarter production and delivery results – missing its goals for both. The automaker confirmed missing its delivery guidance of 17,000 vehicles in Q2 with only 14,370 vehicles, while also missing its production guidance of 20,000 vehicles with only 18,345 vehicles.
The stock price fell sharply (over 4%) in pre-market. Now the first Wall Street analysts are commenting and adjusting their earnings prediction to account for the new information released by Tesla.
Deutsche Bank’s Rod Lache is among the firsts to send a note to clients. He maintains his hold rating on the stock with price target of $290 per share, but he adjusted his 2016 estimate to a loss of $0.42 from a profit of $0.09.
In the note, he commented on the implications on Tesla’s production based on talks with suppliers:
“That said, suppliers continue to suggest Tesla has had difficulty maintaining steady production of Model X, with some estimating “up time” is as low as 50%. This is highly unusual for an automaker… so we are not sure whether Tesla has overcome production challenges.
We are adjusting our 2016 estimate to a loss of $0.42 from a profit of $0.09 to reflect the adjustment to Tesla’s Q2 delivery forecast.
At a high level, while we are modestly disappointed by the number, we are not shocked. This is not the first time Tesla has missed an aggressive target. Tesla has admitted to over-reaching on the complex design of Model X, and they are paying the price. Aggressive plans (for expansion, production, vertical integration, new markets, and features such as Autopilot) are part of Tesla’s DNA.
Somewhat encouragingly, there are reasons to believe execution of the next phase of automotive growth should be achievable.
We currently see at least 3 significant drivers for the stock: 1) Increasing visibility into TSLA’s business plan; 2) Re-focusing Tesla’s strategy on execution of this plan (most investors, and we suspect most Tesla customers, have not yet signed up to all aspects of management’s plans for a broadly defined sustainable energy company); and 3) Achieving execution milestones (i.e. production, cash flow).”
As usual, we recommend taking analyst notes with a grain of salt. They are often successful in moving the stock price, but you always need to take things into perspective. In this case, Rod Lache is ranked #138 out of 4,010 analysts on Tip Ranks with a 67% success rate and an average return of +15.6%.