Tesla analyst cuts Model 3 forecast, now sees bear market in stock ahead

Another article with another “reputable” resource to denounce TSLA. Citing the same source as Dennis Fitzgerald, Thomas Franck uses Joseph Spak’s analysis from RBC to raise FUD for TSLA.

Tesla doesn’t give these numbers out, so these theories are complete speculation. As such, they can’t cite values with high certainty so I have made all their value-based claims “uncertain”. I will come back and review this in after Tesla announces their quarter and I will remove any uncertain claims they were right about and give them credit for being correct.

On the other hand, I will point out where they were wrong. I suspect they do not know how Tesla deliveries work. Getting the cars to their proper destination for owners to be able to pickup is 99% of the work. China did have some customs issues in China, and that would be due to some bad paper work. But the cars are still in China, printing new paper work seems to be much easier than building the actual car and shipping it to China. In fact, it can be resolved in China from any laser jet. It was 1600 cars and they have likely been delivered by now. I can’t see such a thing affecting delivery numbers at all unless it was a mistake at the very end of the quarter. So, we will see who is closer. CNBC’s select Analyst from a multi-billion dollar bank with a team of full time Analysts, or me who thinks the number will be higher than 57,000 (4,500 above their lowered expectation) and a rough ~6000/week production rate I believe they can maintain.

FUD (11 points)

fear points (3)

• RBC Capital Markets lowers its 12-month price target on shares of Tesla amid softer demand expectations and a delivery snag in China.
• Analyst Joseph Spak's new target is a 14 percent reduction to his prior forecast and implies more than 20 percent downside over the next year from Friday's close.
• The stock is already down 30 percent from it's recent 52-week high and 20 percent in 2019 alone.

uncertainty points (5)

• "We see both 2019 and 2020 revenue as down vs. the 4Q18 run-rate and, given Tesla is priced for growth, believe the valuation will come in," Spak writes.
• The brokerage cut its first-quarter Model 3 delivery forecast to 52,500 from 57,000 and slashed its price target to $210 from $245, a 14 percent reduction that implies more than 20 percent downside over the next year.
• "Overall, for 2019 we now forecast about 261,000 Model 3 [deliveries], down from 268,000 prior. Our 2020 forecast of 347,500 remains unchanged."
• Spak, who has an underperform rating on Tesla shares, predicts the electric car maker will post an adjusted loss of 64 cents per share, down from a prior estimate of a profit of 68 cents per share.
• "Regionally, we assume 21,000 units in Europe, 6,000 to 7,000 in China and the remainder in North America," Spak wrote. "In China, some deliveries were delayed because of a customs issue."

doubt points (3)

• The analyst cited recent price cuts to its popular Model 3 as evidence both of diminished demand and in reducing his earnings outlook.
• "The larger part of potential demand for Tesla products is at a price point that we do not believe Tesla can be profitable," he added.
• "The company has begun to offer some of these price points, but we believe they will be dilutive to margins."

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jsturgis