Argus Downgrades Tesla On Coronavirus Impact, Slashes 2020 Delivery Forecast By 19%

The coronavirus pandemic is going to hurt Tesla Inc TSLA's prospects in 2020, according to Argus. 

The Tesla Analyst

Bill Selesky downgraded Tesla from Buy to Hold.

The Tesla Thesis

Tesla's vehicle deliveries will be negatively impacted by the pandemic in 2020, Selesky said in the Tuesday downgrade note. (See his track record here.)

Ahead of the outbreak, the analyst said he was modeling robust deliveries as consumers continued to flock to the Model S and Model X, as well as the Model 3, which accounted for about 80% of fourth-quarter production, he said. 

Despite past production delays, parts shortages, labor cost overruns and other difficulties, Tesla was on track for improved performance in 2020 and beyond due to its dominant position in the electric vehicle industry, Selesky said.

The analyst noted that subsequent to the outbreak, Tesla had to suspend production at its factory in Freemont, California March 23 and is set to suspend production at its New York plant, save for parts and supplies necessary for service, infrastructure and critical supply chains.

"However, in the near term, we believe that consumers will focus on basic concerns (food, safety, employment, etc.) and expect consumer confidence and spending to take a major hit as consumers defer large discretionary purchases."

Selesky lowered the 2020 Tesla deliveries forecast by 19% to 409,000 vehicles and also reduced 2020 and 2021 EPS estimates on expectations of a slow recovery in demand.

Argus is bullish on Tesla's longer-term prospects, the analyst said. 

The firm sees downside in the stock to the $350-$400 range, which it said would offer an attractive buying opportunity for long-term investors.

The Argus downgrade comes less than a week after Morgan Stanley's Adam Jonas upgraded Tesla to Equal-weight on the premise that the stock is now rightly valued after the COVID-19 sell-off and the company is better positioned to weather the pandemic.

The Tesla Price Action

Tesla shares were trading 17.32% higher at $509.50 at the time of publication Tuesday. 

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Photo courtesy of Tesla.