Tesla Inc. and its stock will likely take a big hit after it reports on its Q1 earnings results in April on account of weak U.S. demand for its all-electric sedans, and lingering delivery problems plaguing deliveries of its Model 3 overseas, especially in China.
Canadian global investment bank RBC Capital Markets lowers its 12-month price target on shares of Tesla amid these concerns. The new target for analyst Joseph Spak is a 14 percent drop in his prior forecast. What this means is a more than 20 percent downside over the next year from the stock's close on March 22.
"We see both 2019 and 2020 revenue as down vs. the 4Q18 run-rate and, given Tesla is priced for growth, believe the valuation will come in," said Spak in a note to clients.
RBC cut its first-quarter Model 3 delivery forecast to 52,500 from 57,000. It also slashed its price target to $210 from $245, or a 14 percent reduction that implies a downside of more than 20 percent over the next year.
"We see both 2019 and 2020 revenue as down vs. the 4Q18 run-rate and, given Tesla is priced for growth, believe the valuation will come in," said Spak. "Overall, for 2019 we now forecast about 261,000 Model 3 (deliveries), down from 268,000 prior. Our 2020 forecast of 347,500 remains unchanged."
Spak predicts Tesla will post an adjusted loss of 64 cents per share, down from a prior estimate of a profit of 68 cents per share. He assumes sales of 21,000 units in Europe, and from 6,000 to 7,000 in China with the balance in North America. He noted some deliveries in China were delayed because of a customs issue.
He noted the 2019 Model 3 average selling price is now $53,600, down from $55,500. This figure will remain in the first half as Tesla fulfills higher-end demand internationally before lower priced models that carry lower gross margin kick in.
Tesla shares fell 1.3 percent in premarket trading Monday following the RBC note. It's already down 30 percent from its recent 52-week high, and 20 percent so far this year.
Also unexplained by Tesla is the puzzle that registrations of new Tesla vehicles fell significantly from January to February, according to the Dominion Cross-Sell Report. The 6,252 Teslas were registered with motor vehicle agencies in the 23 states covered by the report in February compared to 23,310 in January and a monthly average of 13,000 to 17,000 in Q4.
Dominion's data doesn't reflect Tesla's introduction of a $35,000 version of its Model 3 sedan, its lowest-price offering yet, which is likely to lift sales. Still, falling registration totals are a worrisome sign for the company.
