A Tesla Bear’s Q2 Delivery Preview
Tesla’s quarterly delivery and production report is expected to be released later this week. Cowen analyst Jeffrey Osborne, who has a $300 price target and UNDERPERFORM rating for the stock, raised his Q2 delivery forecast to 84,000 from 70,000, citing faster China/Model Y ramp. As of June 30th, the FactSet consensus estimate for Tesla's Q2 deliveries is 72,149 vehicles.
Dried up demand: While optimistic about activity in China, Osborne is skeptical about recent demand in the U.S. and Europe.
“Recent moves on cutting price for both S, X by $5k, and the 3 by $2k, offering free supercharging months after saying they never would again, as well as lowering the cost for full self driving (FSD), suggest to us that demand generation has been a challenge post COVID-19's pause in auto sales in April and May.”
“Sales in the U.S. and Europe appear more challenging and data from key countries in Europe suggest they are losing share. In May, the Model 3 fell to 3rd place for EV sales behind the Renault Zoe and VW e-Golf and even YTD the Zoe is outselling the Model 3 in Europe.”
Push for profitability: In a recent message to employees, CEO Elon Musk said 'Breaking even is looking super tight. ... Please go all out to ensure victory!' Tesla has had three quarters in a row of GAAP profitability and despite the COVID-19 crisis. Four quarters in a row would make the stock eligible to be added in the S&P 500.
Staying with the hot hand: While Cowen remains bearish on Tesla over the long-term, Osborne recognizes there is near-term opportunity due to investor exuberance towards electric vehicles.
“...anything EV related is red-hot for investors now and there is a scarcity of ways to invest in the theme, thus we see the stock continuing to "work" near-term despite our caution on competitive positioning over time and valuation.”
