Before Q2-2018: UBS note to Investors on Sunday, two days before Tesla Q2- Earnings Call.
Analyst Colin Langan, maintains his sell rating on Tesla with a price target of $195
“UBS reaffirms its sell rating for Tesla shares, predicting the carmaker will report second-quarter earnings per share below expectations”. “We are cautious on TSLA Q2 results … Q2 results likely highlight cash flow and profit challenges,”. “Is the pricing strategy a prelude to a capital raise?”
“The market should not ignore fundamental headwinds that persist with regards to TSLA’s Model 3 profitability, stationary storage, and solar … we believe TSLA will eventually need additional outside funding.”
“We do not see sustainable profitability in the second half; however, given the higher priced initial mix, a Q3 profit is possible if TSLA can average production of over 3k/week. We expect margins to correct in 2019 as the mix normalizes toward a long term average,”
“Our Sell thesis remains focused on cash burn, sustainable profitability, and quality concerns.”
Before Q1-2018
UBS analyst Colin Langan maintained a Sell rating on Tesla with a $195 price target.
“We think the changes to the automated line at this late stage are concerning and raise questions about the viability of the 10k/week target and TSLA’s long-term goal of ‘reinventing the machine that makes the machine.”
Langan told CNBC that Tesla should increase production of the Model 3 by 2018’s third quarter or it will have to raise capital.
According to a WSJ article linked here, Colin Langan thought that Tesla’s cash burn will continue “until it reaches the 5,000-a-week inflection point for a quarter, a milestone that he calculates would generate about $1 billion in working capital in the short term.”
“If Tesla can’t meet the goal, it would face greater pressure to raise money from the debt or equity markets, which could be challenging if investors lose confidence,” he said
My 2¢.
Analyst Langan maintained sell rating on Tesla for the last six months and his price target remained at $195 throughout this period.
In February Langan predicted “given the “limited” profitability of the Model 3 and Tesla’s need to invest more money for the Model Y development, the company will need to raise additional capital from investors.”
Two months later Langan told CNBC that “If Tesla ramps up Model 3, they will not have to raise additional capital”. As we can note from the WSJ article, he thought 5,000 per week Model 3 production a crucial milestone for Tesla.
Tesla has eased past that goal.
Though I don’t think we will hear from Langan his thoughts on Tesla crossing the 5k per week Model 3 milestone, he now says “Q3 profit is possible if TSLA can average production of over 3k/week”.
Sources:
WSJ
Barrons
