Tesla's 'grandiose' goals may finally be too bold for Wall Street
- Tesla's goals may be too high, leading one Wall Street analyst to lower his price target and estimates.
- The electric-car maker missed its production targets in the first-quarter.
- It's also had to deal with series of negative news, such as a Moody's downgrade and a government investigation into a fatal car accident involving its Autopilot system.
- You can view Tesla's stock in real time here.
It's bad news bears for Tesla.
Tesla and its larger-than-life CEO Elon Musk are known for aiming high, but Wall Street is growing wiser as even the most bullish analysts are starting to scale back their expectations in light of the automakers recent woes.
On Tuesday, Tesla announced it missed its first-quarter production targets for the mass-market Model 3 sedan. The electric automaker said it manufactured 2,020 Model 3 vehicles in the last week of its first quarter, falling short of its 2,500 vehicle goal. Some Wall Street banks had already lowered their estimates and earnings forecasts before Tesla made the announcement.
"Management provided some color which could be viewed as near-term encouraging (stronger recent production pace, no debt/equity raises needed)," Joseph Spak, an RBC Capital Markets analyst, wrote in a note to clients. "However, the recent episode also made us review our long-term assumptions which were likely too aggressive."
Spak lowered his Tesla price target to $305 a share, roughly 20% below his previous target of $380. Tesla shares are trading at $274 apiece Wednesday morning.
Tesla's failure to meet its near-term objectives will weigh on the stock in the short term, Spak says. "But of course it doesn't stop there with Tesla having much more grandiose end-of-decade volume goals (and Tesla Semi and solar+storage)," he adds.
However, Spak believes these concerns can be resolved through more tempered estimates.
The analyst says his production and demand estimates may have been "too aggressive" as Tesla's production capabilities are being put to the test. The company faces several hurdles, including producing its electric car battery modules at a faster clip and reducing its production bottlenecks, all while ensuring quality at the same time, Spak says.
In recent weeks, the company has been swept up in a series of problems as it struggles to contain a wave of negative news including analyst forecast cuts, a Moody's downgrade of its debt, and a car crash involving the company's semi-autonomous Autopilot driving system.
Yet there is a silver lining to Tesla's production rate miss. The carmaker said it won't need to raise more funds this year by selling stock or issuing debt, which would help mitigate cash balance concerns.
Tesla shares are down 14.41% this year.
