Ascendiant Capital Bullish On Tesla Post Q1 But Notes Near-Term Challenges

In a report published Thursday, Ascendiant Capital Markets analyst Theodore O'Neill commented on

's first quarter results, noting the company reported both a top and bottom line beat to consensus estimates, but faces several upcoming challenges. According to O'Neill, Tesla indirectly offered guidance that it would make 60 percent more cars in the bottom half of 2015 with the majority of those in the final quarter of the year. The analyst noted that this implies "there are literally thousands of ways" the company can fall short of its goals. The Model X, Tesla's yet to be released SUV, has plenty of components that it does not share with the Model S and a timing glitch on part delivery for just one piece could result in a production shift into the fourth quarter or even the first quarter of next year. O'Neill noted that any such delays could have a negative influence on margins. However, these upcoming challenges have no lasting impact to the long-term growth outlook for the company. O'Neill continued that Tesla said it would begin shipping cars by rail and increase the number of vehicles in the delivery pipeline to meet the higher demand. Both of these items will result in a "significantly larger" finished good inventory than would be expected if one simply looked at past inventory turn data. As a result, the analyst "dramatically" lowered his estimates due to incorrectly incorporation manufacturing issues surrounding the pre-production and early production impact of the new Model X. The analyst is now expecting Tesla to report revenue of $0.92 billion in the second quarter, $1.27 billion in the third quarter, $1.67 billion in the fourth quarter and $4.80 billion for the full year fiscal 2015. This compares to his prior estimates of $1.18 billion in the second quarter, $1.78 billion in the third quarter, $2.02 billion in the fourth quarter, and $5.90 billion for the full fiscal year. In addition, the analyst is now expecting Tesla to report losses of $0.94 per share in the second quarter, $0.33 in the third quarter, earn $0.37 per share in the fourth quarter and report a full-year loss of $1.26 per share. This compares to his prior estimates of earning $0.17 per share in the second quarter, $1.23 per share in the third, $1.56 per share in the fourth quarter and $2.72 per share for the full fiscal year. Finally, O'Neill stated that Tesla's move into residential and commercial energy store is currently "too small" to affect estimates but it may sometime in the next few years. Shares are Buy rated with a $320 price target.