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The first quarter results of Tesla Inc., along with calls with analysts, have been "one of the biggest debacles we've ever experienced," according to a long-time Tesla bull. , who said Thursday that he was tossing the white sponge and giving up his purchase note on the stock.
Daniel Ives of Wedbush reduces his rating on Tesla
TSLA, -2.94%
to neutralize to outperform, the equivalent of the purchase, in a burning note that reflects so much frustration and desperation.
"In our 20 years of hedging technology stocks on the street, we consider this quarter to be one of the biggest challenges we have ever faced. Musk & Co., in an episode coming out of Twilight Zone, has the impression that demand and profitability will magically return to the Tesla. history, "writes Ives in a note to investors. "At the end of the day, we think the company's direction is aggressive and management / board is not doing enough aggressive cost-cutting and closing future efforts to preserve capital and sustainable way to the profitability of the street. "
Tesla on Wednesday evening posted an adjusted loss and a forecast of missed revenue larger than expected, although Wall Street seemed to focus on the promises made by the leaders during their conversation with analysts, including that the automaker is again profitable. year.
For the full report, read: Tesla misses earnings estimates for first quarter, but Wall Street bets on profit hopes
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Tesla recorded a loss of $ 702 million, or $ 4.10 per share, in the first quarter compared to a GAAP loss of $ 4.19 per share for the same period last year. Tesla added $ 494 million, or $ 2.90 per share, after adjusting for one-time items, compared with a loss of $ 3.35 per share a year ago.
Revenues reached $ 4.5 billion, up from $ 3.4 billion a year ago.
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Analysts surveyed by FactSet were expecting an adjusted loss of $ 1.15 per share for a turnover of $ 5.4 billion for the quarter. The loss per share forecast has widened in recent days and follows Tesla's release of GAAP and adjusted earnings in the third and fourth quarters.
"In our 20 years of hedging technology stocks on the street, we consider this quarter to be one of the biggest challenges we have ever faced. Musk & Co., in an episode coming out of Twilight Zone, has the impression that demand and profitability will magically return to the Tesla. story. "
The title fluctuated between gains and losses in Wednesday's enlarged session, but plunged Thursday by more than 4%.
JPMorgan analysts, led by Ryan Brinkman, said they expect a negative reaction, noting that Tesla also missed the margin and free cash flow estimates, while offering forecasts calling for a further loss at the same time. second quarter, compared to consensus expectations of a profit.
"The management also seemed less opposed to a capital increase, recognizing" the deserving idea "of the idea, which, in our opinion, serves to highlight the risk of dilution that probably increases after 1T's cash flow and cash balance were lower than JPM's and consensus expectations, "says Brinkman. written in a note to customers.
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JPMorgan estimates that stocks are underweighted with a price target of $ 200 lower by 20% than its current level. The company expects an increase in shipments of 43% to 59% in the second quarter compared to the first quarter, even if, at this level, it should be in deficit, said the analyst.
"If the forecast for second-quarter shipments seems potentially aggressive, the outlook for the full year at 360-400K implies a further sequential increase of + 35% to + 45% from 1H19 to 2H19, further highlighting the risk performance related to implicit data compliance generate positive earnings and cash flow, "said Brinkman.
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RBC analyst Joseph Spak said the numbers were "wilder than expected" and agreed that a capital increase seemed likely. Spak noted that research and development spending was the lowest since the fourth quarter of 2016.
"Elon talked about subjecting Tesla to a" spartan diet "and, while we do not doubt that the company has spent inefficiently in the past, the low capital investment + R & D and, of course, the declining sales, are not the mark of a fast-growing company. TSLA continues to be globally valued, "he wrote in a note to clients, recalling his underperformance in relation to his price target and his $ 200 price.
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In Bernstein, analyst Toni Sacconaghi said that the elephant in the room is always asked and wondered if the report and the call actually offered information.
"We can not help but think that Tesla dismissed the issue when calling last night's results, with management using prognostics rather than additional data points" he wrote in a note. "While we have long seen a plausible path to Model 3 sales at $ 400,000, our short-term visibility on price / demand elasticity remains limited."
Bernstein evaluates the stock at market performance with a price target of $ 325.
Piper Jaffray took a more optimistic tone, recalling his overweight in the Tesla title and guessing that the drawback will be limited in the first quarter.
"Although logistical difficulties – long tied to low transaction prices – had an obvious impact on first quarter profitability, we think this was temporary," analyst Alexander Potter wrote in a note. "The guidance involves a recovery in the second half for deliveries and margins, which we think is reasonable.
The first quarter "suffered from a particularly unfavorable combination of unfavorable factors, including seasonality, a large accumulation of deliveries outside the United States (negative for logistics costs and working capital), as well as that the expiration of tax incentives in the United States, "Potter said. .
Tesla kept its promise of improving affordability by lowering prices, which hurt margins. But it's a first-quarter problem that should not be repeated, he said. Piper is still with a $ 396 course goal.
Analysts at Deutsche Bank said the first quarter was a weak start to the year, but that the results should improve over the coming quarters with the increase in model 3 shipments. Analysts, driven by Emmanuel Rosner, have effectively reduced their stock price target from $ 10 to $ 280 and reduced some estimates to account for lower margins, they said.
Needham analysts, led by Rajvindra Gill, have questioned the promise of management profit this year. Tesla has never generated annual profit and will face "deteriorating margins, combined with slower revenue growth and loss of profitability," they said.
Tesla shares have fallen about 25% this year. The S & P 500
SPX, + 0.05%
earned 16% in 2019, while the Dow Jones Industrial Average Index
DJIA, -0.56%
gained 9%.
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