Market Overview

Pacific Crest Views Tesla Warranty As Only A Minor Headwind

Share:
Related TSLA
Bulls & Bears Of The Week: Apple, Ford, Nike, Verizon And More
Elon Musk Talks GM, Marijuana And More In '60 Minutes' Interview
Right Back Where the Stock Market Started, But Worse (TalkMarkets)

In a note released Wednesday, Pacific Crest commented on the recent drive-train warranty issues at Tesla (NASDAQ: TSLA).

The firm estimated the additional warranty costs will effect gross margins by roughly 30 basis points and estimate a negative $0.10 impact on third quarter earnings and $0.03 negative impact on fourth quarter earnings.

Their full year estimates are lowered, with the new estimates below:

  • 2014: lowered from $1.30 to $1.17
  • 2015: lowered from $3.18 to $3.08
  • 2016: lowered from $7.99 to $7.80

In the note, Pacific Crest also laid out their case, along with a bull and bear case:

Pacific Crest case

Our price target of $316 is based on 4x EV to our 2016 revenue estimate of $11.40 billion. We estimate Tesla's three-year revenue CAGR at 66%, whereas the comparable automotive group trades at 0.9x EV to 2016 revenue on a three-year CAGR of 4.6% over the same period.

Our forecast assumptions include:

  • Persistent strong demand and the successful launch of the Model X, driving 2016 deliveries of 115,000 with average selling prices (ASPs) of $103,000.
  • Model S/X gross margins just above 30% in 2016.
  • Leased vehicles hitting roughly 6% of total volumes over time

Bull case

  • $436 based on 5x EV to upside to our 2016 revenue estimate of $11.40 billion.
  • Production and demand outperform over the next 12 months, driving the company to push new capacity coming online higher, which subsequently drives 122,000 deliveries in 2016 on ASPs of roughly $108,000.
  • Model S/X gross margins exceed 30% in 2016.

Bear case

  • $132 based on 2x EV to meaningful downside to our 2016 revenue estimate of $11.40 billion.
  • Production and demand lag forecasts over the next 12 months, allowing for only 100,000 deliveries in 2016 on ASPs of $98,000.
  • Model S/X gross margins peak in the high-20% range in 2016

Shares of Tesla are trading relatively unchanged at $262.00.

Latest Ratings for TSLA

DateFirmActionFromTo
Dec 2018JefferiesUpgradesHoldBuy
Oct 2018Canaccord GenuityMaintainsHoldHold
Oct 2018JMP SecuritiesInitiates Coverage OnMarket Outperform

View More Analyst Ratings for TSLA
View the Latest Analyst Ratings

Posted-In: Pacific CrestAnalyst Color News Guidance Analyst Ratings

 

Related Articles (TSLA)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
BAPItau BBAUpgrades274.0
DVNJP MorganDowngrades37.0
EOGJP MorganUpgrades118.0
EQMBarclaysDowngrades48.0
EXPDGoldman SachsDowngrades68.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

2 Analysts Cut Targets After Sprint Cuts Prices

Imperial Capital Thinks Caesars Entertainment May File For Bankruptcy