Bernstein is Worried About Tesla (TSLA) Gross Margins

Analyst Toni Sacconaghi Jr says his team has struggled to see how Tesla (NASDAQ: TSLA) can achieve the 20% GM target for Model 3 in 2018 and its 25% GM goal on Model 3 by mid-2019. The analyst notes that the company historically has earned just about 25% GM on the pricier Model S and X products and benchmarking against the BMW 3-Series he sees potential for lower margins to TSLA.

He does acknowledge there are scenarios in which the company could achieve these targets but notes that while boosting margins in the second half of 2018 through its product mix, he fears such a mix of products would be unsustainable and worries that continued delay of the $35,000 base model may alienate consumers, leading to heightened cancellations, something that has reportedly spiked recently.

Sacconaghi Jr. notes that the company has consistently been overly optimistic on its GM targets and until he sees otherwise, he remains Market Perform rated with a target of $265.00 which is about 20% below Thursday intraday high of $330.00.

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