Tesla Analyst Duel: Very Bullish vs. Most Bearish

Tesla Motors Inc. (NASDAQ: TSLA) has gotten through yet another earnings report. While the company’s shares were down marginally after earnings, 24/7 Wall St. wanted to look at one of the more bullish analyst calls and then compare and contrast it to the most negative analyst call on Wall Street. Credit Suisse has a $290 price target, but Merrill Lynch is still sticking with that low price objective of $65.

The electric car maker posted an adjusted diluted earnings per share (EPS) loss of $0.36 on adjusted revenues of $1.1 billion. In the same period a year ago, the company reported adjusted EPS of $0.02 on revenues of $761.34 million. First-quarter results also compare to the consensus estimates for EPS of $0.31 and $1.23 billion in revenues.

According to Credit Suisse’s Dan Galves:

Maintain 2015 est[imates]: On a like-for-like basis (ex higher-than-expected ZEV [zero-emissions vehicle] credits and foreign exchange (FX) balance sheet write-down), Tesla reported a loss of $0.51 vs Credit Suisse estimate of -$0.57. The company met 26% gross margin guidance (despite worse-than-guided Euro), and SG&A/R&D (OpEx) grew less than expected. Labor hours per vehicle improved by 20% during the quarter and OpEx guidance implies no growth after the second quarter. We’re encouraged that Tesla is making progress on efficiency targets which should lead to meaningful operating leverage as volumes grow over the course of 2015. We see EPS approaching $1.00 and free cash flow being at least neutral by fourth quarter. We maintain 2015 EPS est of $0.12, increase 2016 to $4.00 (from $3.80), and maintain our $290 price target and Outperform rating.

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The brokerage firm concluded its report by saying that the second-quarter volume guidance was light but the commentary on demand is strong. According to Credit Suisse, Tesla will deliver between 10,000 and 11,000 vehicles in the second quarter. Basically, the firm expects order flow to improve as more 70D models become available for test-drive globally, and Credit Suisse remains confident in the 55,000 unit guidance.

After the first quarter, Merrill Lynch lowered its 2015 EPS estimate to $0.40 from $0.95, the 2016 estimate to $1.45 from $1.50, and 2017 estimate to $2.35 from $2.40. However, the firm is maintaining its $65 price objective.

Key takeaways that Merrill Lynch saw in the earnings were:

• Pre-announced deliveries were ahead of forecast.
• First-quarter adjusted EPS loss was not quite as bad as expected.
• Tesla burned $558 million of free cash flow in the first quarter (-$624 million excluding regulatory credits), which was much worse than the $339 million estimate.
• Operating expenses, capex and cash burn all remain elevated, with little relief in sight. In the firm’s view, the market continues to underestimate the significant challenges that lie ahead for Tesla.

In the Merrill Lynch report, analysts John Lovallo and John Murphy, detailed:

Tesla pre-announced first quarter of 2015 deliveries of 10,030 units on 4/3 (actual units 10,045), which was slightly above our 9,900 unit estimate and the company’s conservative 9,500 unit forecast. Revenue, excluding lease accounting, of $1.1 billion was roughly inline with our forecast, but adjusted EPS loss of $(0.36) was just ahead of our $(0.40) expectation and consensus of $(0.49). Excluding +$66mm of regulatory credits and a $(22)mm FX revaluation hit, not explicitly incorporated into our model, adjusted EPS would have been a loss of about $(0.71) for the core business.

Shares of Tesla were down fractionally at $229.95 Thursday morning. The stock has a consensus analyst price target of $263.59 and a 52-week trading range of $177.22 to $291.42.

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