UBS Still Selling Tesla, Thinks Cash Flow Guide Seems Misleading
- 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.
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
|Jan 2017||Guggenheim||Initiates Coverage On||Buy|
|Oct 2016||Goldman Sachs||Maintains||Neutral|
|Oct 2016||Goldman Sachs||Downgrades||Buy||Neutral|
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