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Sell Tesla On Poor Gross Margin Guidance, Berenberg Warns

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Sell Tesla On Poor Gross Margin Guidance, Berenberg Warns
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Berenberg’s Adam Hull maintained a Sell rating for Tesla Motors Inc (NASDAQ: TSLA), while reducing the price target from $165 to $150. The EPS estimates for 2016 and 2017 have been reduced from $1.50 to $1.00 and from $3.40 to $2.50, respectively.

The EPS estimates for 2016-2020 have been slashed by 22-33 percent to reflect weaker-than-expected Q4 results and disappointing 2016 gross margin guidance. The gross margin estimate for Tesla has been reduce by about 100bps, reflecting a lower margin forecast for Model X and Model 3.

“We assume lower Model X sales (only partly compensated by higher Model S sales) and slightly lower Model 3 sales, partly because the pace of competitor launches in electric vehicles (EVs) and plug-in hybrids (PHEVs) appears to be increasing,” analyst Adam Hull wrote.

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Telsa announced its 2016 gross margin guidance for Model X lower than expected. The company indicated that Model X costs were higher than anticipated, which is why Model X gross margins are expected to expand to merely 25 percent by late 2016. Hull expects Model 3 to be a strong product, although margins are likely to disappoint.

The analyst said that there is “much better value” in Daimler AG (OTC: DDAIF) [Rated: Buy, PT at €90] and Volkswagen AG (ADR) (OTC: VLKAY) [Rated: Buy, PT at €160]. He added that Mercedes has a very strong brand, with the new E-class having nearly all of Tesla’s autonomous driving features, while electric cars similar to the Tesla Model S and X would arrive in 2018-2019.

Latest Ratings for TSLA

DateFirmActionFromTo
Jan 2017Morgan StanleyUpgradesEqual-WeightOverweight
Jan 2017GuggenheimInitiates Coverage OnBuy
Oct 2016Goldman SachsMaintainsNeutral

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View the Latest Analyst Ratings

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