Pacific Crest: Avoid Tesla

• Tesla Motors Inc TSLA shares have declined 26 percent over the past six months, to a low of $188.07 on January 27.
• Brad Erickson of Pacific Crest has maintained a Sector Weight rating on the company.
• Following channel checks, Erickson expressed increased caution on the stock, given the signs of possible lagging demand, along with potentially continuing production challenges.

Analyst Brad Erickson elaborated, “Consistent with our October checks, our latest checks with U.S. sales centers indicate that Model X orders are still lagging expectations. While getting the X to showrooms would help, we don't expect that to happen until later this spring due to production challenges.”

In addition, the company has continued with its promotional offer for Model S till March of 20 percent off the old lease cost. However, Erickson pointed out that this has not led to any meaningful increase in sales.

“That the Model S should be benefiting from the lagging Model X underscores our incremental skepticism on overall demand,” Erickson said, while adding that the Model S could be approaching its run rate ceiling.

The estimates through 2020 have been lowered, driven by increased skepticism regarding both profitability and unit volume production, along with continuing mixed feedback regarding demand.