And he is not impressed with the company's latest deliveries update.
In a note to clients on Friday, Lovallo wrote that while the company's Good Friday news dump that it had delivered 10,030 vehicles in the first quarter beat BofA's estimate for 9,500 deliveries, there are a bunch of reasons why the news isn't actually impressive.
Here are Lovallo's four main points (emphasis ours):
- First, the company delivered 9,834 units in 4Q14 and therefore 10,030 units in 1Q15 only represents 2% sequential growth. Furthermore, Tesla stated that 1,400 units that were scheduled for delivery in December slipped into 1Q15, which when adjusted for actually implies a 23% Q/Q decline (adj. 4Q deliveries of 11,234 vs adj. 1Q deliveries of 8,630). Either way, the notion that Tesla is experiencing "disruptive growth" seems very questionable.
- Second, 10,030 units represents a production run-rate well below installed capacity of about 1,300 vehicles/week.
- Third, the company has stimulated some near-term demand by repurchasing 2WD Model S vehicles from existing customers in an effort to sell the newer AWD versions, which creates additional residual value risk.
- Finally, Tesla has reportedly been offering significant discounts (up to 20%) on showroom models, "lightly-used vehicles," and on excess inventory in regions such as China, in an effort to meet the quarterly delivery guide. This, in our view, sets the stage for very weak 1Q15 financials and raises significant doubt around the company's ability to deliver 55K units in 2015.
Lovallo also wrote that the company is likely to take a big impact on sales in Europe, where the euro has plunged in value against the US dollar but the company has not raised prices in response.
Lovallo has an underperform rating and a $65 price target on shares of Tesla.
In contrast, Brad Erickson at Pacific Crest - who has an outperform rating and a $293 price target on the stock - wrote on Monday that Tesla reporting deliveries ushers in a new era of transparency at the company, which Erickson saw as a positive.
"Increasing transparency is usually a good sign. Sustainability of demand remains a key tenet of the bear thesis on TSLA. Disclosing end-of-quarter deliveries from now on shows management's confidence in the sustainability of demand, in our view," Erickson wrote.
In afternoon trade on Monday, Tesla shares were up over 7%.