Spectacular, focus stays on earnings
Tesla Motors CEO Elon Musk unveils giant utility scale residence batteries on the Tesla Design Studio in Hawthorne, California.
David McNew | AFP | Getty Pictures
Tesla shares surged on Wednesday after what Barclays’ referred to as the corporate’s “spectacular” file quarterly deliveries quantity, however Wall Avenue analysts largely stay cautious, centered on the upcoming second-quarter earnings report.
The electrical car maker reported delivering 95,200 automobiles throughout the second quarter, beating Tesla’s earlier file of 90,700 deliveries, which occurred within the fourth quarter of 2018. The consequence additionally beat Wall Avenue’s expectation of 91,000 deliveries, in accordance with analysts surveyed by FactSet, however met the expectation of a file quarter set by CEO Elon Musk final week.
“The Q2 supply beat doesn’t change our cautious view on Q2 earnings,” UBS stated in a notice to traders.
Regardless of the banner consequence, which despatched Tesla’s fill up practically 7% in premarket buying and selling, analysts largely left estimates for the corporate’s 2019 earnings and income unchanged. RBC cautioned traders that Tesla didn’t replace or reiterate its 2019 forecast, which the corporate did within the first quarter of this yr.
Goldman Sachs stated it continues “to anticipate some sequential stepdown in demand and finally deliveries as we progress into 3Q19,” the agency stated.
Even companies with probably the most optimistic view on Tesla’s future, similar to Baird, instructed traders to concentrate on the corporate’s upcoming second-quarter earnings report. Tesla is anticipated to report earnings on Aug. 7.
“We predict Q2 earnings would be the subsequent catalyst to revive confidence and reattract traders to the title,” Baird stated. “We proceed to love the set-up and imagine there are a number of catalysts upcoming which is able to contribute to a difficult quick atmosphere.”
Here is what each main analyst stated about Tesla’s deliveries.
Goldman Sachs’ David Tamberrino: Promote score, $158 worth goal
“We proceed to concentrate on the sustainability of demand for the corporate’s merchandise — notably as we imagine 2Q19 deliveries and order ﬂow was helped by the corporate’s launch of its Customary Mannequin Three variant, a leasing choice, and right-hand drive Mannequin 3s (see our notice, The place will we go now?); additional, demand within the US was possible aided in 2Q19 by the looming second step within the section out of US Federal Tax Incentives for TSLA automobiles that started on July 1. In consequence, we proceed to anticipate some sequential stepdown in demand and finally deliveries as we progress into 3Q19.”
UBS’ Colin Langan: Promote score, $160 worth goal
“The Q2 supply beat doesn’t change our cautious view on Q2 earnings. Worth reductions, the broader availability of cheaper variations of the Mannequin 3, and the section out of the US EV tax credit score ($1,875) helped Q2 deliveries. The worth cuts will possible end in margin stress. Based mostly on the upper than anticipated deliveries, we’re elevating our Q2 EPS estimate to -$0.17 from -$0.78; we anticipate consensus estimates might be revised equally.”
J.P. Morgan’s Ryan Brinkman: Underweight score, $200 worth goal
“The magnitude of 2Q loss and quantity of FCF generated within the quarter will now be key to look at, particularlyas we estimate the firmmay have undertaken premium prices to satisfy supply targets. The talk can even possible flip to sustainability of demand on condition that 2Q was, like 4Q18, a pre-buy quarter within the US forward of one other step-down in availability of federal tax credit on July 1. We’re elevating our 2Q estimates as we speak, though not our subsequent interval forecasts, given no change to full yr steering of 360-400Okay.”
Baird’s Ben Kallo: Outperform score, $355 worth goal
“Extraordinarily sturdy deliveries beat even whisper numbers and set the stage for sturdy Q2 outcomes, in our view. The discharge is a optimistic step within the restoration course of for the TSLA narrative, and we predict Q2 earnings would be the subsequent catalyst to revive confidence and reattract traders to the title. We proceed to love the set-up and imagine there are a number of catalysts upcoming which is able to contribute to a difficult quick atmosphere, together with the upcoming Q2 report and quantity/earnings development in 2H. … We predict a money movement optimistic quarter is actually achievable, notably if working capital headwinds in Q1 unwind and/ or CapEx is available in decrease than we forecast (we presently mannequin $625M).”
Barclays’ Brian Johnson: Underweight score, $150 worth goal
“We credit score Tesla for the spectacular supply beat- forward of Avenue expectations even after the intra-quarter supply updates through Elon’s leaked emails (hyperlink). Nonetheless, as we wrote final week Tesla, Inc.: First issues first, transfer the steel (06/27/2019), whereas deliveries very properly could shock to the upside, Tesla’s incentives are fiercely bent on maximizing deliveries to concentrate on money technology, possible on the expense of profitability. Furthermore, with the potential for future capital raises (possibly as quickly as subsequent yr) the necessity to preserve an accelerating development narrative is now extra necessary than ever. We proceed to anticipate a loss this quarter in addition to a difficult gross sales/revenue atmosphere for the rest of the yr because the EV tax credit score drops and ASPs dampen from growing shifts away from its S&X fashions.”
Morgan Stanley’s Adam Jonas: Equal-weight score, $230 worth goal
“Whereas there have been quantity of “leaked” emails and experiences prophesizing a possible “file quarter” for deliveries, we had not spoken to any traders that anticipated deliveries to be this excessive…Based mostly on reported deliveries YTD, if TSLA had been to ship 95ok models in Q3 and This fall that will put them at roughly 350ok models for 2019, simply shy of their full-year steering of 360k-400ok models.”
Bernstein’s Toni Sacconaghi: Market-perform score, $325 worth goal
“We imagine that Tesla has a shot at being worthwhile this quarter on a non-GAAP foundation, even with materially pressured automotive gross margins … We estimate that the US accounted for practically 70% of Mannequin 3’s bought this quarter, vs. <50% in Q1, suggesting that US gross sales could have been boosted by the expiring Federal tax credit score this quarter, and that Tesla could possibly be challenged to satisfy its full yr deliveries bogey ... Tesla acknowledged that it'll not report automobiles in transit – we fear that it is going to be harder for traders to observe true underlying demand in a given quarter."
Credit score Suisse’s Dan Levy: Underperform score, $189 worth goal
“Assuming Tesla maintains its ’19 supply information, it will indicate min. 2H deliveries of simply over ~200ok models. We imagine this can be robust to attain, and mannequin 2H deliveries of ~180ok, esp. as Tesla will nonetheless must work its manner by one other minimize to the US EV tax credit score … Into 2Q EPS the main target might be on gross margin and FCF. As a part of its supply launch Tesla highlighting “value efficiencies” and enhancements in working capital by streamlined international logistics and supply ops. We mannequin optimistic 2Q FCF, primarily associated to optimistic working capital.”
Financial institution of America’s John Murphy: Underperform score, $225 worth goal
“As a reminder, TSLA continues to forecast losses in 2Q, though improved from 1Q:19 ranges, with a return to profitability in 3Q:19, as deliveries inflect increased and price discount initiatives take impact. Nonetheless, we’d notice that TSLA faces a component of combine degradation into 2H:19+ as lower-priced Mannequin Three variants start to comprise a bigger portion of quantity, which is able to possible stress margins, earnings, and money movement … quick curiosity (by way of quantity of shares) hit an all-time excessive of 44mm (~33% of the float) on the finish of Could, though days to cowl stays balanced and inventory borrow nonetheless liquid because of buying and selling quantity. In our view, this might arrange for a brief squeeze, as 2Q:19 deliveries had been barely forward of extra pessimistic Avenue.”
Nomura Instinet’s Christopher Eberle: Impartial score, $300 worth goal
“Tesla’s 2Q car deliveries (95,200) reached the mid-point of the corporate’s steering vary, one thing that we imagine many traders thought of unlikely earlier within the quarter. Mannequin Three deliveries of 77,550 exceeded our 70,135 estimate and consensus of approx. 70,500. Fashions S and X had been additionally forward of expectations. Tesla solely offered a mixed 2Q supply determine for the 2 fashions (17,650), however we estimate Mannequin S deliveries had been approx. 8,500, above our prior forecast of seven,822. For Mannequin X, we estimate approx. 9,000, roughly in step with our prior estimate.”
RBC Capital Markets’ Joseph Spak: Underperform score, $190 worth goal
“The unit numbers are higher than anticipated and the inventory is up ~7% after-market which we imagine could possibly be near a near-term prime. The subsequent catalyst is earnings the place the main target will shift to auto gross margins, money movement and sustainability of demand … Whereas 2Q19 models had been higher, we nonetheless warning 1) that blend of automobiles (and discounting to maneuver models) might weigh on profitability and therefore 2Q19 possible sacrificed margins for models. We discover the corporate’s intense concentrate on hitting short-term targets considerably curious for a narrative supposedly long-term centered, and a pair of) the sturdy push on the finish of the 2Q19 might have pulled ahead some demand … Of notice, Tesla didn’t reaffirm steering as they did within the 1Q19 supply launch.”
Macquarie Analysis’s Maynard Um: Outperform score, $400 worth goal
“TSLA’s sequential improve so as backlog must also additional help deliveries going into H2 and we anticipate additional Mannequin S&X refreshes and lower-priced variants of the Mannequin Three to drive continued demand by a minimum of the rest of the yr. We then anticipate China demand to develop because the Shanghai manufacturing unit ramps up manufacturing beginning in This fall and accelerates in FY20 H1.”
Evercore ISI’s Arndt Ellinghorst: Promote score, $200 worth goal
“Whereas we’ll revisit our Q2 Rev/Mgn/FCF, we stay snug with our FY unit estimate of 345ok (implying TSLA can keep within the ~90ok/Q vary however possible struggles to maneuver increased), given continued questionable international M3 demand (SR+ Q2 preliminary push now behind) and continued involved round S/X combine (21% YoY; 15-16ok per Q 1H development). Though a stable bounce again vs disastrous Q1, worth/combine will stay a big gross margin sequential headwind for the remainder of the yr, and now we have but to see a cloth transfer up from 5-6k/week M3 manufacturing (goal is 7k by finish of the yr).”
– CNBC’s Michael Bloom contributed to this report.