'Valuation looks increasingly unsustainable': Here's how Wall Street is reacting to Tesla's third-quarter earnings miss
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- Tesla stock fell 8% after the company reported third-quarter earnings that missed analyst expectations.
- Wall Street was unimpressed by the results and comments from Elon Musk about the future of the Cybertruck.
- Here's how Wall Street analysts are reacting to Tesla's third-quarter report.
Tesla stock dropped as much as 8% on Thursday as investors reacted to third-quarter results that missed analyst expectations, and some analysts are ringing the alarm bell.
Comments from Tesla CEO Elon Musk during the conference call didn't reassure investors either, with Musk warning that the ramp-up of production for the Cybertruck will be incredibly difficult.
"We dug our own grave with Cybertruck. Nobody digs a grave better than themselves," Musk said.
Here's how Wall Street analysts are reacting to Tesla's third-quarter report.
JPMorgan: 'Nearly ~$800 billion valuation looks increasingly unsustainable'
Analysts highlighted that even after a slew of price cuts on all of its vehicles, Tesla was still unable to deliver more vehicles. That could point to an underlying issue with demand, according to JPMorgan.
"We think it is important to remind investors that Tesla has not sold more vehicles than was earlier expected as a result of the 15-20% price cuts it has implemented across its lineup in all global markets. Rather, Tesla has had to institute these price cuts only to sell fewer vehicles than analysts earlier expected," JPMorgan said.
The bank also noted that Tesla's third-quarter EBIT margin of 7.5% is no longer a standout among other automakers, with Ford and General Motors seeing similar margins of 8.4% and 7.2% in the second quarter, respectively.
After the third-quarter earnings results, Tesla's "nearly $800 billion valuation looks increasingly unsustainable with EBIT margin and revenue growth now at or below recent General Motors and Ford levels and [its] year-to-date free cash flow yielding just 0.4%," JPMorgan said.
JPMorgan reiterated its "Underweight" rating and $135 price target, representing potential downside of 40% from current levels.
Wedbush: 'mini disaster'
Analyst Dan Ives said Tesla's conference call was "not an inspiring one for the bulls" as Musk highlighted the challenges about falling profit margins and the production roadmap of the Cybertruck.
"We would characterize last night's conference call as a 'mini disaster' as the Street wanted to get their arms around the falling margins and constant price cuts seen globally, but instead we heard from a much more cautious Musk which focused on a higher interest rates, FSD/AI investments, and highlighting the difficult path for Cybertruck production over the next 12 to 18 months," Ives said.
Also not encouraging for Tesla bulls is the fact that Musk said further vehicle price cuts could be possible as amid a difficult macro economic environment.
Wedbush reiterated its "Outperform" rating but lowered its price target to $310 from $350, representing potential upside of 38% from current levels.
Bank of America: 'ongoing risk from price cuts'
BofA said downtime at its factories and price cuts were a double whammy that weighed on profits.
"There is ongoing risk from price cuts aimed at improving affordability for a much larger set of consumers," analysts warned.
"We reiterate our Neutral rating on Tesla, balancing near-term risks from the broader macro, increasing competition, and the impact of recent price cuts against its efforts to reduce costs, meaningfully grow, and unique ability to remain agile," the bank said.
Bank of America also lowered its price target to $290 from $300, representing potential upside of 29% from current levels.
Contributer : Business Insider https://ift.tt/XFfHLNW
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Friday, October 20, 2023
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