Monday , September 26 2022

Tesla's profits are "a failure," says the long-standing bull in the terrifying commentary


The profit of Tesla Inc. for the first quarter and the accompanying call with analysts is "one of the biggest declines we've ever seen," according to a long-time bull of Tesla who said on Thursday he had declined his buy-in rating.

Daniel Ives of Vedbush cut his rating to Tesla

TSLA, -3.61%

to neutral than superior, buying equivalent, in a burning note that reflects the same amount of frustration and despair.

"In our 20 years of covering the street technology, we view this quarter as one of the biggest funerals we have ever seen, while Musk & Co. in an episode of the twilight zone, it is as if demand and profitability magically return to Tesla's history, "Ives wrote in a note to investors. "Ultimately, we believe the company's leadership is aggressive, and the management / board does not take aggressive enough action to cut costs and close future efforts to preserve capital and provide a sustainable path to profitability on the streets."

Tesla publishes late-Wednesday wider-than-expected forecasts for loss and revenue losses in the first quarter, although Wall Street has been zero initially on the promises the company has made during its interview with analysts, including that the car maker will be a winning year again.

For the full report, read: Tesla misses first-quarter earnings forecasts, but Wall Street focuses on earnings hopes

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In the first quarter Tesla reported a loss of $ 702 million, or $ 4.10 per share, compared to a loss of $ 4.19 per share in the prior period. Adjusted for one-off positions, Tesla said it had lost $ 494 million, or $ 2.90 per share, compared to a loss of $ 3.35 per share a year ago.

Revenues reached 4.5 billion dollars, compared to 3.4 billion dollars a year ago.

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Analysts surveyed by FactSet expected a revised $ 1.15 loss per share in sales of $ 5.4 billion for the quarter. The share loss forecast has increased in recent days and has occurred after Tesla reported GAAP for third and fourth quarters and adjusted earnings.

"In our 20 years of covering the street technology, we view this quarter as one of the biggest funerals we have ever seen, while Musk & Co. in an episode of the Twilight Zone it works as if demand and profitability magically will return to Tesla's history. "

Daniel Ives, analyst, Vedbush

Shares widened between gains and losses in the extended session on Wednesday, but they shed more than 4% on Thursday.

JPMorgan analysts led by Ryan Brinkman said they expect a negative reaction, noting that Tesla has also missed margin forecasts and free cash flow by suggesting directions that require a new loss in the second quarter against consensual earnings expectations .

"Management also seemed less opposed to raising equity by recognizing" some merit "of the idea that in our opinion serves to highlight the risk of distraction that is likely to increase after tracking the cash flow of the 1st and money balance weaker than JPM and consensus expectations, "Brinkman wrote in a customer note.

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JPMorgan estimates the shares as lower, with a cost of $ 200, which is 20% below its current level of trading. The company predicts that supplies will grow by 43% to 59% in the second quarter compared to the first one, although even at this level it expects to be a loss, says the analyst.

"Although the 2Q supply seems to be potentially aggressive, the 360-400K year-over-year projections suggest a further 35% to + 45% incremental increase from 1 H 19 to 2 H 19, further emphasizing the risk of meeting performance of the figures needed to generate positive income and cash flow, "Brinkman said.

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RBC analyst Joseph Spack said the figures are "uglier than expected" and they agree that the capital increase seems likely. Spack noted that R & D spending was the lowest since the fourth quarter of 2016.

"Elon talks about putting Tesla on a Spartan diet, and although we have no doubt that the company has spent inefficiently in the past, low investment and research and development, and of course, lower sales are not the hallmarks of hyperbole, but TSLA continues to be appreciated as one, "he wrote in a customer note, confirming his rating below the price of the stock and the price of $ 200.

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In Bernstein, analyst Tony Sakkongji said the elephant in the room still wants and asks if the report and the call really provided some information.

"We can not help feeling that Tesla has circumvented the question of last-minute income, and management is trying to use forecasts instead of providing point data," he wrote in a note. "While we have long seen a credible path to 400k sales, our close to some extent visibility in terms of demand / price elasticity remains limited."

Bernstein estimates the shares that the market performs with a $ 325 price target.

Piper Jaffray took a more optimistic tone by repeating his overweight rating on Tesla's stock and assuming that the decline would be limited to the first quarter.

"Although the logistical challenges – long with lower transaction prices – have had an obvious impact on profitability in the first quarter, we think it's temporary," says analyst Alexander Potter. "Targeting is a recovery from the second half for both supplies and margins, and that seems reasonable to us.

The first quarter "suffered from a particularly nasty combination of counter-winds, including seasonality, a large build-up of supplies outside of the US (negative for logistics costs and working capital) and the expiration of tax incentives in the US," Potter said. ,

Tesla has made a good promise to improve accessibility by lowering prices, thus hurting margins. But this is a question from the first quarter that should not be repeated, he said. Piper still has a price tag of $ 396.

Analysts at Deutsche Bank said the first quarter is a weak beginning of the year, but the results should improve over the coming quarters, as Model 3 supplies are rising. Analysts led by Emanuel Rosner cut their share price by $ 10 to $ 280 and cut some ratings to report lower margins, they said.

Needham's analysts, led by Rajvindra Gill, question the promise of the profit-making directors this year. Tesla has never generated annual profits and will face "worsening margins combined with a slowdown in revenue growth, further pushing profitability."

So far, Tesla's shares have fallen by about 25%. S & P 500

SPX, + 0.10%

increased by 16% in 2019, while Dow Jones Industrial Average

DJIA, -0.46%

increased by 9%.

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