UBS Sees a Q2 'Miss' for Tesla (TSLA)

UBS analyst Colin Langan reiterated a Sell rating and $160 downside price target on Tesla Motors (NASDAQ: TSLA) ahead of Q2 results, saying they expect a "miss". Tesla is scheduled to report after market close on Wednesday, August 3rd.

Langan sees Q2 EPS of -$0.78, below consensus of -$0.51. "Consensus forecasts Q2 EPS of -$0.51, up from -$0.57 in Q1. However, deliveries are down 3% q/q, so we'd expect a q/q deterioration in EPS," he commented. "Preliminary Q2 deliveries of 14.4k (vs. 17k guide) and H2 guide of 50k deliveries implies FY deliveries of ~79k, slightly below 80k-90k guidance. TSLA's Q2 outlook implies the second consecutive quarter of negative q/q growth in deliveries, possibly indicating demand for the Model S is slowing. As we noted in our prior note, Will Model 3 Reveal End Run Up?, the reveal of the Model 3 will likely pull some demand away from the Model S."

In addition to slowing deliveries, they firm points to risk to gross margin targets following the announcement of a cheaper Model X 60D & debut of a cheaper Model S 60 in June (70 added last year). These models are priced $8.5-9k cheaper than their respective 75 kWh
models, but are likely produced at a similar cost (they are delivered with a 75 kWh battery pack that can be unlocked to full capacity for $9-$9.5k after delivery), the analyst commented.

Langan said negative catalysts outweigh the positive. "We see few positive catalysts until the Model 3 launch late next year. Until then, we see risks around production targets (500k by '18), Model S demand & TSLA Energy growth," he commented. "We are cautious on the SCTY deal as synergies seem limited. The NHTSA & SEC investigations are also still on-going. Long term, we remain cautious about Model 3 profitability. While the recent secondary provides the capital for the production ramp, we still expect TSLA to burn ~$1.5bn in FCF in 2016 and ~$630m in Q2."

For an analyst ratings summary and ratings history on Tesla Motors click here. For more ratings news on Tesla Motors click here.

Shares of Tesla Motors closed at $222.27 yesterday.

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