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UBS Still Selling Tesla, Thinks Cash Flow Guide Seems Misleading

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UBS Still Selling Tesla, Thinks Cash Flow Guide Seems Misleading
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  • The share price of Tesla Motors Inc (NASDAQ: TSLA) has dipped 40.14 percent year-to-date, falling to a low of $143.67 on Wednesday.
  • Colin Langan of UBS has reiterated a Sell rating on the company, while lowering the price target from $160 to $140.
  • Langan believes that the company’s “net” cash flow guidance appears misleading, given that Tesla Motors burned $232 million in 4Q15.

Analyst Colin Langan explained that although the company reported positive core operational cash flow of $179 million, it still ended up burning cash worth $232 million, after capex.

Related Link: Credit Suisse Lowers Tesla's Price Target To $240; 'Choppy Path, But Worth The Wait'

Langan believes that the guidance of “net” cash flow positive for 2016 could be misleading, given that this is not free cash flow but includes draw-downs from the company’s $1 billion ABL, with $135 million drawn at the end of Q4.

Langan expects the company to witness free cash flow burn of $800 million in 2016, with capex likely to reaccelerate in 2H2016 and again in 2017, as Tesla Motors looks to invest ahead of Model 3.

The company reported its non-GAAP EPS at $(0.87), well below the consensus of $0.10, with gross margins missing the guidance. Despite missing its Q4 targets, the company has guided to 30 percent Model S margins and 25 percent Model X margins by year end.

In addition, the company has not reaffirmed its storage sales targets for 2016 and Langan believes that the $2-$5 billion target for 2017 is unachievable due to the slow demand ramp.

The EPS estimate for 2016 has been lowered from $0.60 to $0.30 to reflect deliveries.

Latest Ratings for TSLA

DateFirmActionFromTo
Jan 2017GuggenheimInitiates Coverage OnBuy
Oct 2016Goldman SachsMaintainsNeutral
Oct 2016Goldman SachsDowngradesBuyNeutral

View More Analyst Ratings for TSLA
View the Latest Analyst Ratings

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