Tesla (TSLA) Remains Needham's Top Concern, Reiterates Underperform

Needham & Company analyst Rajvindra Gill reiterated an Underperform rating and {REMOVEPT} price target on Tesla (NASDAQ: TSLA).

The analyst comments "Tesla delivered 97K vehicles in Q3, which was slightly below management's 100K forecast. The company would need to deliver ~105K vehicles in Q4 to hit the bottom end of its 360-400K FY19 target. Despite an increase in its order backlog, we believe it is unlikely for TSLA to achieve its previously set target, which would require meaningful sequential growth for the Model S/X, an unlikely result given the last three quarters of negative Y/Y deliveries, in our view. Among its 97K deliveries, 79.6K were Model 3s (below our 82K estimate), with 17.4K being higher-margin Model S/X. We view gross margins and profitability as key concerns for the company in both the short-term and long-term horizons. Gross margins continued to face pressure from declining Model S/X sales, an unfavorable mix shift within Model 3, competitive pricing pressure, and negative margin drag from the services revenue line. Given the decelerating revenue growth in 2019 and ongoing gross margin pressure, we expect net losses to exceed the losses in 2018, placing more pressure on what we see as an already expensive valuation."

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Shares of Tesla closed at $232.00 yesterday.

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