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From JPMorgan's "Sell" Downgrade Of Tesla
You already saw the key charts yesterday, of which the most notable was this...
... and now here is JPM's explanation why it is downgrading TSLA to to "Underweight on Softer Execution, Stronger Competition, and Lower Oil Prices"
We lower estimates and valuation, and downgrade TSLA shares to Underweight from Neutral after the firm reported softer than expected 4Q results which did not evidence the type of sharp rebound in execution we were hoping for following 3Q’s production challenges. Much of the 4Q miss was blamed on the timing of deliveries (push out from 4Q to 1Q, owing to customers being on vacation, severe winter weather, and shipping problems at year-end), although this was itself driven by continued production challenges intra-quarter which had caused assembly to be back-end weighted in the first place.
To us, 3Q & 4Q taken together serve to highlight the execution risk associated with scaling production ? a concern we have struggled with for some time in the context of the firm’s clearly demanding valuation. Ability to profitably scale production is of course central to the story: TSLA guides to 55,000 deliveries in 2015 vs. 32,000 in 2014 but, more importantly, 500,000 in 2020 and “millions” in 2025.
Even presupposing the demand for these vehicles will be there (we forecast substantially less – 282K in 2020), there is also the matter of being able to produce these vehicles at the desired margin rate, for which we think there is some doubt.
But our downgrade is about more than execution risk; we note: (1) The profound drop in fuel prices harms the competitiveness relative to internal combustion engine vehicles of TSLA’s planned Model 3 mass-market car, the potential for which we believe accounts for the majority of today’s equity value; and (2) Competition is mounting – automakers at the recent Detroit Auto Show debuted a number of electrified vehicles, some of which appear directly aimed at the Tesla Model S (e.g., Mercedes C-Class Plug-in Hybrid), the X (e.g., Audi Q7 e-Tron Plug-in Diesel Hybrid), and the 3 (e.g., Chevrolet Bolt) – see takeaways from our walking tour of the show. We reduce our estimates on flow-through of 4Q’s softer sales and margin trends, and guidance for higher operating costs: 1Q15 goes to -$0.31 from +$0.93 and FY15 to $1.89 from $4.12. Our December 2015 price target-declines to $175 from $180.
And while JPM listed several explict rising risk factors among which:
- 4Q deliveries were softer
- 4Q revenue was lower
- 4Q gross margin was weaker
- 4Q operating expenses were higher
- 4Q EPS was a loss rather than profit
- 4Q free cash flow was a bigger outflow
- 1Q production is guided -33% below JPM
- 1Q deliveries are guided -28% below JPM
- 1Q operating expense is guided much higher
- 1Q gross margin guidance is softer than we expected
- 2015 delivery guidance tracked below JPM
- 2015 operating expense guidance was guided higher
- Lower FY15 EPS on flow-through of 4Q’s softer margin trend and guidance for higher expenses
The most prominent one is the following:
Other automakers starting to look a bit more like TSLA. The Detroit Auto Show featured a plethora of electrified offerings from the likes of luxury competitors such as BMW, Audi, and Mercedes ? companies already cranking out multiples of 125,000 vehicles per quarter. BMW in particular appears highly intent to address this part of the market, with its i3 and i8 models thus far. The i8 appears to have all or more of the emotive appeal of the original Tesla Roadster. In the past, TSLA has welcomed this competition, but we think it will intensify further and potentially compete for a smaller than expected addressable market for electrified vehicles, pressuring TSLA volume, given greater than expected competitiveness of internal combustion engine vehicles due to the lower price of fuel, which appears to have a structural element to it. From a mainstream model perspective, GM showed a concept version of a new 200 mile range battery electric vehicle (the “Chevrolet Bolt”) which IHS Automotive has listed as the “B-BEV” launching in 4Q16 – one year ahead of the Model 3. And we estimate the timing of the Model 3 is at greater susceptibility of slipping than the GM vehicle.
TSLA starting to look a bit more like other automakers. While other automakers are beginning to emulate Tesla in important respects, it is not lost on us that Tesla is in some ways beginning to look more like other automakers, such as when it comes to capital intensity (it guided for $1.5 bn of capital expenditures Wednesday, above the $0.9 bn we had modeled). As it grows larger, we estimate TSLA may need, too, to make further concessions to its highly unique and thus far appealing business model. For example, it is not clear to us that a mass-market vehicle could sell hundreds of thousands of units without a dealership base where consumers could readily test drive various versions or examine colors in person or drive away the same day in a new car.
Oh well, time to shift focus to the next "feel good" story stock. As for JPM, which just like Morgan Stanley recently, just made Elon's shit list, one thing is certain - neither of the two sellside banks will be underwriting Tesla's next, and at this cash burn rate - imminent, converible bond/equity offering.
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Put an automated grilled cheese maker in the dashboard. That will change JP Morgans mind.
Tesla strikes back with a 100 ounce silver rebate with every purchase.
Just use the promotion code: Wynter
Drone captures Soviet-era ‘Tesla Tower’ lightning machine (VIDEO)
Chevy Bolt, the EV for Canadian sprinters.
I miss my Pinto ....
Just be glad Bruce Jenner missed it too!
>>Just be glad Bruce Jenner missed it too!
Luuul
I don't own a Tesla...but my long time best friend (San Marino Ca.) does and I love the car just because I like technology and it's neck snapping fast (he has the high performance model - whatever that is). But the reason why it works is because the Taxpayers in california and with Federal subsidies have sprinkled the FREE charging stations all over. And there's often only two or four cars allowed at each charging station. So, it doesn't take a genius to figure out the upside sales feasibility has an inherent constraint. The gamble from Tesla was that the .gov's would then subsidize MORE charging stations and monopolize MORE space in some highly competitive parking garages. (e.g. Pasadena) This model only works with LOW sales....sure, eventually electricfied auto's will continue to become more popular. Too bad it's illegal for me to drive a golf cart to the grocery story...but I guess, the auto manufacturers will make sure that will stay illegal.
Electric cars are fine for folks with a lot of money and no brains. I'll check back on this technology in 10 years. The problem is the batteries. Maybe by then they will have improved eough to make the cars worth considering. More likely it will be 20 years or more.
It is common in Silicon Valley to see charger stations at businesses (Google), colleges (DeAnza), and retailers (Fry's).
I also talked with a Tesla sales rep, and he described to me a Tesla project to build a chain of charger stations every 200 miles or so from California to the east coast.
Tesla also demonstrated a battery pack changing capability, where a Tesla battery pack could be swapped in half the time it takes for a gasoline car to take on a full tank of fuel.
At this time, the battery swapping just seems to be a demonstration of a capability, since Tesla does not have a battery swapping program. It's up to the car owner to provide the battery to be swapped.
I interpret the batter swapping capability as an afterthought, something they figured out how to do AFTER they designed and built the car. Battery swapping requires a sophisticated setup that automatically torques the mounting bolts after the battery is installed. This is necessary because the battery case is a load bearing structural member.
It is obvious that a future Tesla could be designed with battery swapping in mind, which presumably could be made to work a lot faster and simpler.
Fire Sale?
Seems so. Although still one of the most expensive mobile fireworks.
http://rt.com/news/231683-chemical-blast-barcelona-igualada/
Those pictures are absolutely creepy. Definitely deserving of "Honey? Could you get the kids and get in the car? Right now, please."
that orange cloud means halogens were mixed with the acid..think mustard gas of wwI, lungs just liquify when exposed...not a good day for a walk in spain.
Halogens were obvious present, however, orange isn't necessarily indicative of their presence. I would be a large sum of paper halogens are not a big component of the smoke.
http://en.bct-test.com/52/i-484.html
Smoke is bad, but it isn't mustard has (phosgene and derivatives). You're more likely to get sick from burning insulation.
Enough of the drama.
bandgap, you go breath it then..lol see josey wales vid..https://video.search.yahoo.com/video/play;_ylt=A2KLqITNptxU02sAtrb7w8QF;...
Paging Agent Orange, Agent Orange.........................................
Thanks Bill of Rights, this is why i love ZH, great posters keeping us all informed while Brian Williams watches his daugeter get her ass eaten..
http://morningafter.gawker.com/while-you-watched-the-globes-allison-will...
Seems like I just saw this yesterday.
Get Zee Gold, its how I start my day!! Have a good one
I always start my day reviewing Hillary escaping sniper fire in Bosnia.
I figure hell, if she could get though that.....how bad could my day possibly be?
https://www.youtube.com/watch?v=uHVEDq6RVXc
>>while Brian Williams watches his daugeter get her ass eaten
Rome before the fall.
And BTW, F Brian Williams and that weird replacement guy they got. Cronkite would have never gone for this shit
He probably bangs his daughter too. If there's nothing wrong with two dudes, there's nothing wrong with that either. /s
False Alarm it's Soros's New Orange Revolution.
Blaming the Russians in 3...2...1...
He should stick to blowing up rockets.
the billion dollar plant outside reno just went up in smoke..what sound does a tesla car make going by a gas station? sucker sucker sucker.
hindsight is 20/20. Just need a little creativity in spinning the excuses.
Has anyone ever been passed by a Chevy Volt? If so, was it on the back of a tow truck?
Only while I was parked and until the laughter subsided.
Most of them here are buried under 6 feet of snow, with another blizzard expected this weekend. Long Ford Super Duty and Caterpillar!
Actually, the Chevy Volt is a wonderful example of brilliant management skills at GM.
The Prius hybrid goes about 40 miles and then has to switch to gasoline or deisel. It costs ballpark around $30,000.
The Chevy Volt hybrid goes about 40 miles and then has to switch to gasoline or deisel. It costs ballpark around $40,000.
I simply can't figure out why no one wants to buy one.
And you thought only Shale was gonna get knee-capped.
don't worry about elon, he got plenty
Wishing don't make it so.
Lots of stocks out there whose price is based on wishful fantasy. Tesla was one of the bigger jokes.
Broke and Deranged
$122 x $5.8b ~ $710b
That's all you need to know right now about Apple.
Let's aim for a $1 trillion dollar company folks!
Wow, target price slash from $180 all the way down to $175......BALLSY move JPM!
If I were an investor I would put money on what ever Elon Musk thought was a good idea. Google is no dummy and just invested one billion $ in SpaceX.
"Google is no dummy and just invested one billion $ in SpaceX."
"GOOG is no dummy and invested in more Gov. Subsidies and anticipated bailout". Fixed it for ya!
SpaceX will be fine because you just keep bribing politicians for .gov contracts and they will make sure the money spigot continues to flow.
Tesla is a whole different ballgame so as deflation hits the sales of these vehicles (regardless of gov't incentives) will begin falling well short of expectations.......get ready for lots of lame excuses soon.
>>I would put money on what ever Elon Musk thought was a good idea.
I like folks like you. Believe in your guy and when it fails I have been short since the top.
Go Elon!
How they get to use Tesla's name is beyond me.
Oh wait:
http://upload.wikimedia.org/wikipedia/commons/thumb/c/cc/Tesla_colorado....
This is a major problem because stupid people actually listen to the ratings given by banks.
Tesla will be world largest maker of electric tooth brushes used in space stations ten years from now. Praise the Elon.
Chariots of Fire
The nice thing about the oil plunge is it's creating headaches for plenty of bad guys as well as good. Maduro is one. Elon Musk is another.
Funny story about our Elon. He grew up in a privileged household in South Africa, but fled to Canada to join his mother when he was 17. Our Elon was above doing his military service in the South African army, back when there was still a fighting chance of defending the people who had built everything in South Africa worth preserving from the tyranny of the African National Congress. Dying for Christian civilization was for Boers.
He took a Canadian passport, guessing, correctly, that US authorities would admit a Trudeaupian far sooner than they would a white South African refugee from black and communist terror.
Tells you all you need to know about the loyalty of the founder of Paypal to anything but his own bank account.
Doesn't feel all that good when it's other banksters stabbing you in the back, eh, Elon?
OOPS! Did someone say Crash and Burn?
hope that satellite internet thing for everyone works out better.
One thing I've been reading about these cars (which I like, although i could never afford) is that insurance rates have skyrocketed on some owners. I guess simple fender benders can cost enormous sums of money to fix. Now that Ford moved to aluminum F150, maybe repair fees will come down (doubtful)> Neat cars, but way too much money for any peasant.
I wonder how many cars burned when internal combustion fueling systems and carbys were being developed? Thousands perhaps?
Is there even a conventional car model on the road today that does not have more fires in it per year, from one cause of another, than the Tesla models do?
Probably not - just a wild hunch.
PS: by the way, the Prius has been using a much higher density and lighter lithium ion battery pack since 2012. About 3.5 million of the new lithium model are driving around on the roads today and they are not bursting into flame or gassing people to death - jus sayin.
So does America want to make marketable cars anymore, or not? Because over the next ten years the sales of hybrid cars is going to go up a geometric curve, and the conventional models down the flip-side curve.
Tesla on fire .... turn up the AC !
Rename the car .... call it .... oh, I don't know .... how about .... "The Edison" ?
Elon & Barry will elope to Mars
I think the actual rating was "Smell"
JPM compared several new cars as competitors to the Telsa, but all of them are hybrids. That's far different from a total electric car, and I believe a different market. Tesla customers are looking for a total electric car, not something that can go about 40 miles before switching to a gas or deisel power source. The cars JPM compares to the Tesla are really just high end competitors to the Prius.
Tesla's problem is that the Tesla S (if you want the battery that provides a 300 mile range) costs about $100,000 when when you add up all the costs (tax, license, options, etc). That puts it in the same price class as a Mercedes S or a Porsche. People in that price range don't care about fuel costs, and the people who do care can't afford a Tesla. The new Tesla model is cheaper and will appeal to a larger market of folks who would like a total electric car, but only at a price they can afford.
Tesla's mistake from the start was making a high end car that most people can't afford. To be fair, it was an easy mistake for him to make. When Elon was at Paypal, he drove a million dollar plus McLaren F1 to work, so he probably thought a $100,000 car was an econocar that worker bees would buy for their daily commute.
P.S. I'm not a Tesla owner.
Instead of calling a mistake, why not just call it a market entry strategy.
It is common in the high tech industry to introduce exotic, risky, and costly new capabilities to the market place in high-end products.
Volumes are typically low, and when things go wrong, the number of crisis is kept to a minimum and are far more manageable.
Musk said in 10 years Tesla will be worth as much as Apple.
Translation: "Race you to the bottom!"
BTW - good tag line for a car company.