Third-quarter layoffs, reports of hand assembly and major Model 3 scaling concerns only justified UBS's bearishness on Tesla Inc TSLA.
Considering the firm’s previously announced production miss, compounded by a decrease in zero-emission vehicle credits and lower Model S and X margins, UBS expects a third-quarter gross margins hit to cut sequential earnings per share from -$1.33 to -$2.20.
Poor fixed cost absorption ahead of Model 3 ramping will only intensify the losses.
A Cascade Of Misses
Tesla had promised 1,500 Model 3s in the third quarter but turned out a mere 220 amid production bottlenecks.
“Not only does the miss undermine the credibility of future Model 3 targets, but it increases the near term risks,” analyst Colin Langan wrote.
Anticipating Model 3 production misses of 11,000 in 2017, 65,000 in 2018 and 40,000 in 2019, UBS lowered respective EPS estimates from -$5.30 to -$6.40, -$1.60 to -$3.30 and 20 cents to -$1.00 (see Langan's track record here).
Continued delays may yield more long-term losses as the rollout of rival electric vehicles force market-share concession.
Bottom-Line Impact
UBS forecasted $900 million in third-quarter cash burn, comparable to last quarter’s $1 billion and indicative of a burn rate that would sustain Tesla for about four quarters.
Considering the stock’s 50-percent year-to-date run reflective of a successful 2017 production timeline, the firm maintains a Sell rating with a $185 price target.
At the time of publication, Tesla was trading at $318.68.
Related Links:
Video: Gene Munster Compares Apples To Teslas What To Make Of Tesla's Mixed Q3 Deliveries __________ Image Credit: Steve Jurvetson [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Date | ticker | name | Actual EPS | EPS Surprise | Actual Rev | Rev Surprise |
---|
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.