Wall Street turns on Tesla with a barrage of negative notes ahead of earnings

Tesla’s last few earnings were relatively uneventful, but next’s week results are shaping up to be quite interesting. Not only because Tesla managed to achieve a record number of deliveries last quarter, but also because of the peculiar action around the company’s stock leading up to the earnings, which are set to be published on February 10.

By “peculiar action”, I mean a series of consecutive negative notes from Wall Street analysts, including from regular Tesla commentators, but also from new analysts initiating coverage on Tesla.

Adam Hull from Berenberg initiated his coverage on Tesla this morning with a sell rating. Earlier this week, its was Pacific Crest analyst Brad Erickson’s turn to issue a sell note citing concerns over Model X demand. Morgan Stanley’s also weighted in on the issue and reduced his price target on the stock by 25%. Coincidentally, Tesla’s stock is down by about 25% year-to-date.Maybe a little less coincidentally, these notes come just a week before Tesla is set to release its Q4 financial results and while the short interest on Tesla’s stock is at an almost 2-year high. The notes are certainly giving short position holders a great opportunity to cover their positions ahead of next week.

The only analyst coming to Tesla’s defence this week is Dougherty’s Andrea James, who has been a long time supporter of Tesla and its stock. James reiterated an overweight rating and wrote in a note to clients that she expects Tesla to report EPS and revenue of $0.06 and $1.73 billion, respectively in Q4 and guidance of adjusted EPS and revenue of $1.23 and $8.5 billion for 2016.

James added:

“Model X remains production constrained. Tesla has been prioritizing quality above all else, ramping exponentially…Tesla has not been marketing the Model X or making an effort to drive new orders. Tesla is working to put more cars on the road, convert reservations to orders, and provide test drives for those who want them,”

She is referring to Tesla holding “Meet Model X” events for reservation holders. There might be someone else sharing James’s optimistic views of Tesla’s stock mid to short-term future, Tesla CEO Elon Musk himself.

Musk increased his stake in the company to 28,903,342 shares last week after exercising over $100 million in stock options. He paid over $50 million out-of-pocket to cover the cost of the transaction (exercised price and taxes). The move is a clear vote of confidence for Tesla, otherwise he would have sold at least some of the options to cover the cost of the transaction or tried to exercise the options at a lower price per share in order to pay less taxes.

Featured Image: Tesla CEO Elon Musk’s reaction to reading these recent analyst notes (not really but that’s what I would imagine).