Tesla Inc.’s total delivery estimates for the full year were lowered at Robert W. Baird to reflect a slower-than-expected Model 3 ramp and moderating demand for Models S and X.
Analyst Ben Kallo said disappointing first quarter deliveries didn’t improve an “overly negative sentiment,” but said he expected the shares to outperform over time as Tesla’s profitability and cash generation improved.
“The narrative on Tesla remains incredibly negative, similar to conditions in the middle of 2018,” Kallo said. “While we acknowledge it may take several quarters for this to shift, we continue to believe sentiment will improve over time as the company proves it can be self-supportive, which should drive sustained share appreciation.”
Tesla shares have dropped 18 percent so far this year, even as the broader market has rallied nearly 16 percent. The disappointing delivery numbers for the first quarter have weighed heavily, but so have worries about a slowing demand, expansion into China and Europe, eroding profitability and an ongoing squabble with the Securities and Exchange Commission.
The Baird analyst now estimates total vehicle deliveries of 361,000 for 2019, around the low end of the company’s guidance of 360,000 to 400,000 units. For the Model 3, Kallo now expects a slower ramp, including 400,000 deliveries in 2020, rising to 500,000 by 2022.
Kallo cut his price target on Tesla to $400 from $465, but maintained his outperform rating on the stock, noting that Model 3 demand concerns are overblown. “We continue to view Tesla as a major disruptor, and think new product introductions, production ramps and further development of innovative technologies will drive growth.”
Tesla shares are indicated little changed pre-market Wednesday. Shares of Chinese peer NIO Inc. gained 4.9 percent pre-market Wednesday after the company showcased a new electric sedan at the Shanghai Auto Show.
Tesla Inc. shares were trading at $273.67 per share on Wednesday afternoon, up $0.31 (+0.11%). Year-to-date, TSLA has declined -17.77%, versus a 16.38% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of Bloomberg.