(Before It's News)
From Tyler Durden: We were surprised at how gingerly the market digested Tesla’s “beat” last night, which as we noted was apples to oranges as consensus estimates did not incorporate the cash-draining SolarCity acquisition results.
Meanwhile, the early pop completely ignored the biggest concern, namely the nearly $1 billion in record cash burn the company suffered in the quarter, a number that is only set to rise in the coming quarters as Tesla rolls out even more unprofitable growth initiatives.
This morning, however, things appear to be changing as Tesla has not only faded its after hours gains, but at least check was down as much as 2.4%.
According to brief Bloomberg summary, Tesla shares have quickly given up all gains from the better-than-expected earnings as the sell-side awaits more clarity on the cost and capital raise plans. One analyst specifically took aim at the fourth quarter results, calling out the beat as “phantom” given the exclusion of the SolarCity acquisition from consensus estimates. Still, even with the stock poised for a decline, shares are still up more than 40% since the beginning of December.
Here is a sampling of select sellside analysts reactions (TSLA has 8 buys, 10 holds, 6 sells with average price target $242) to the company’s earnings report:
MORGAN STANLEY (Adam Jonas)
- The reiteration of the outlook for the Model 3 launch and volume production may be the most important factor from the release, as the company had every chance to use the opportunity to introduce any level of execution risk
- Estimates Tesla has spent as much as $10 billion in combined/aggregate R&D and capex from the beginning of 2014 through the first half of 2017, an extreme figure in both absolute and relative terms
- “We’re about to find out where this invested capital is going. The launch of a single product could multiply revenues by 4x to 5x.”
- Rated overweight, price target $305
COWEN (Jeffrey Osborne)
- Tesla reported a “phantom beat” as Street estimates for EPS and revenue excluded the SolarCity acquisition
- Cash needs are mounting as the “shopping list has grown considerably” since 3Q; estimates ~$25 billion in cash needed over the next 3-5 years
- Timelines “look aggressive” and hopes to gain greater insight into 2H 2017 and Model 3 ramp on 1Q call in the Spring, though expects management to “punt” until July
- Rated underperform, PT $155
BAIRD (Ben Kallo)
- Remains buyers of shares even given the more than 40% rally over the past three months and potential for a pause until a capital raise
- CFO transition news a surprise, though Deepak Ahuja as a replacement is the best possible outcome, as he will bring his financial and company expertise back to Tesla during a critical time for the company
- Bull arguments outweigh the bears, specifically the continued Model 3 execution, the better-than- feared integration of the SolarCity acquisition, the ~$2 billion capital raise as a positive catalyst and Tesla Energy’s potential
- Rated outperform, raises price target to $368 from $338
OPPENHEIMER (Colin Rusch)
- Clarity on the capital plan and completion of a capital raise would be a positive catalyst for shares
- Forecast of 250k annual production runrate by 4Q is above Street expectations and comes with significant execution risk
- Expects bears to focus on earnings power of the business by 2020 as the company works towards “lofty” manufacturing efficiency goals
- Rated perform
DEUTSCHE BANK (Rod Lache)
- Earnings were broadly in-line; Motors gross margin miss (22.2% vs Deutsche estimate 25.1%) was largely due to temporary factors such as deferred revenue for Autopilot and foreign exchange
- Remains cautious on shares due to valuation, particularly given significant risks and uncertainties about the capital and cost plans
- Rated hold, price target $215
BLOOMBERG INTELLIGENCE (Kevin Tynan)
- Fourth quarter results and 2017 update indicate Model 3 production is on track, yet a bevy of initiatives still requires heavy investment and possibly another dilutive capital raise
- Capital spending in fourth quarter was ~$500m below consensus as Tesla limited its cash burn to $448m
As a reminder, Tesla’s short interest 26% of float vs ~20% in early October, according to Markit.
Tesla Inc (NASDAQ:TSLA) shares fell $9.37 (-3.42%) to $264.14 in morning trading Thursday. Year-to-date, TSLA has gained 25.38%, versus a 5.93% rise in the benchmark S&P 500 index during the same period.
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