Barclays Lowers Price Target For Tesla: 'Crossing The Chasm Is Tougher Than It Looks'

In a report published Friday morning, Barclays analysts Brian A. Johnson lowered his price target for Tesla Motors Inc.’ TSLA stock, from $220 to $200, maintaining an Equal Weight rating. The specialist says that, what sets Barclays apart from the Tesla bulls is its skepticism regarding the company’s ability to become a successful mass-market OEM.

“We argue that there are many challenges ahead for Tesla; upon revisiting our margin and delivery estimates, we were reminded yet again that crossing that chasm is harder than it looks, especially in a new era of low oil prices,” the report states.

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The reduction in the price target is justified by “softer volumes and margins,” Johnson assures. The new target seeks to better reflect “the challenges of Tesla's ramp” in production. However, the Equal Weight rating is reiterated as the firm continues to expect “trading to be influenced by the flow of near-term datapoints.”

Regarding margins, the analyst warns: “while Tesla has an opportunity to reach eventually double-digit op. margins (i.e. after it is fully ramped), we believe the street may be underappreciating that Tesla's op. margins will be suppressed through at least the end of the decade (i.e. low-mid single digits), as Tesla increases R&D and SG&A investment to support its growth.”