'His Personality Suggests Resolution Depends on Him Alone': Jefferies Discusses Elon Musk, Cuts PT on Tesla (TSLA) on Increased Risk Profile

May 26, 2022 6:02 AM EDT
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Jefferies analyst Philippe Houchois cut the price target on Tesla (NASDAQ: TSLA) to $1,050.00 per share from the prior $1,250.00 to reflect lower estimates and mounting risks.

New estimates are calling for lower FY output by 5% to 1.415 million, reflecting Shanghai production losses and a slow start in Austin. For this quarter, the analyst is calling for 257k units that will see revenue go to $16 billion, and an auto gross margin of 26%. The Q2 EBIT is seen at $1.86 billion.

Houchois sees an increased risk profile as “long-held fears of disruption from inside have come true.” The analyst then moved to discuss Elon Musk and the ongoing Twitter (NYSE: TWTR) that continues to weigh on Tesla's risk profile.

“"Enemy inside" and "Tesla bigger than Musk" is how we have for years framed the risks from Tesla's unconventional leadership and weak governance. It is hard to isolate factors behind the recent correction, from Nasdaq, to Twitter financial commitments and China lockdowns, but we are clearly witnessing an uncomfortable pile up of negative news from ratings to polarizing political opinions and ethical questions. His personality suggests resolution depends on him alone,” Houchois wrote in a note before adding:

“The "low-filter" communication style can be unsettling although we find it usually helpful as Mr Musk freely shares what is on his mind and implications for Tesla, from raw material shortages to manufacturing challenges or future automation. We also note that the loss of key executives from CFO Ahuja to JB Straubel and head of manufacturing Guillen did not stop Tesla going from strength to strength.”

Net-net, the analyst reiterated a Buy rating as the EV company is likely “to continue generating FCF cash faster than it can build physical product and capacity.” For him, the trillion-dollar question is: How many models are needed to take global share to 5 or 15%?

Tesla stock price closed at $658.80 yesterday.

By Senad Karaahmetovic

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