Tesla (TSLA) Price Target Cut at Piper Sandler by 18% on China Lockdowns, Shares Still Seen as a 'Cornerstone Holding'

May 18, 2022 5:44 AM EDT
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Piper Sandler analyst Alexander Potter slashed his price target on Tesla (NASDAQ: TSLA) shares to $1,035.00 from $1,260.00 to reflect Covid-related weakness in China.

Lockdowns that impacted production in April and May have pushed Potter to slash full-year estimates from 1.54 million to 1.47 million.

Despite the price target cut, Potter still considers Tesla stock as “a cornerstone holding in any "advanced mobility" portfolio.” He reminds investors of Tesla’s strong performance in Q1, which showed the company’s “operational prowess.”

Potter is extremely impressed by Tesla’s cash generation.

“In Q2, we estimate Tesla's cash conversion cycle was negative 16 days. In other words: Tesla is getting paid by consumers long before it pays suppliers. This impressive performance led to operating cash flow of nearly $4B in Q1.ash generation may deteriorate in Q2, but if so, the weakness will likely be short-lived,” Potter said in a client note.

On the demand front, wait times for Model 3 and Model Y are between two and a half months and as much as 5 months.

“In 2H22, Shanghai *might* ramp to 200k+ units/quarter, contingent upon COVID. Berlin and Austin probably can't make up for the Shanghai lockdown in Q2. "Giga Berlin" is only building ~7,500 units/quarter right now (ramping in Summer),” Potter added.

Tesla stock price is down 1% in pre-market Wednesday after closing at $761.61 yesterday.

By Senad Karaahmetovic

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