CFRA Still Says To Sell Tesla On Competition, China Production Concerns

Tesla Inc TSLA scored top- and bottom-line beats in its fourth-quarter earnings and projected a significant sales increase for 2020, but that wasn’t enough to allay the concerns of one skeptic.

The Rating

CFRA analyst Grant Nelson reiterated a Sell rating on Tesla, but raised his price target from $400 to $440. He downgraded the stock on Jan. 9.

The Thesis

Nelson highlighted a year-over-year contraction in Tesla’s automotive gross margins, but that wasn’t his main concern.

“We continue to see significant risks related to the China factory ramp-up, as well as rising EV competition from automakers still eligible for the full federal tax credit in the U.S.,” he wrote in a note.

The analyst largely defies peers in his assessment of Tesla’s China prospects, although he echoes fears related to tax-credit scheduling. The Street expects Tesla phase-outs to yield demand pressure even as rival OEMs benefit from unused subsidies.

Another red flag for Nelson was management’s lack of detail on capex at the Berlin gigafactory. The new facility has been top-of-mind for analysts, some of whom consider it a turning point in Tesla’s narrative.

Price Action

At time of publication, Tesla's stock traded up 11% around $645.70 per share.

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