Tesla Warning? Estimates Cut En Masse At This Wall Street Firm, Next Catalyst Seen As Two Months Away

Tesla Motors Inc TSLA shares have breached the $190 level after negative commentary from Pacific Crest circulated the Street on Tuesday morning. "We'd continue to avoid" the stock, analysts at the firm wrote, citing lagging demand, a ceiling in the Model S and long-term profitability challenges.

Of particular note, Pacific Crest's Brad Erickson cut his Tesla earnings and revenue forecasts significantly.

The graphic tells the story:

Most significantly, Erickson cut his 2020 EPS figure from $23.88 to $14.09, while slashing revenue forecasts to $24.3 billion from $30.8 billion. Profitability estimates in 2018 and 2019 also took a major hit, while Erickson lowered his 2016 EPS figure to 27 cents from 76 cents.

These figures hinge on the success of Tesla's yet-to-be released mass market car, the Model 3. Morgan Stanley's Adam Jonas laid out the situation clearly earlier this week, estimating the vehicle to account for about 60 percent of sales in a decade.

Despite low oil prices, analysts expect the car to provide an alternative to gas powered vehicles for value-aware consumers. Jonas projects the company to reach its 2020 production guidance of 500,000 units by 2025, adding that he sees 250,000 as a better figure in five years.

What's Ahead?

Pacific Crest's Erickson said investors should look ahead to Tesla's Model 3 reveal on March 29. It "remains the [emphasis on 'the'] positive catalyst still out there," he wrote.

Erickson's analysis of Tesla's risk factors is also worth a read:

"The primary risks to our fair-value estimate include, but are not limited to, demand for Tesla's products, production execution risk, new product launches in 2015, new battery factory construction and the company's ability to secure the requisite capital for future products and other capital spending projects. Further broader risks include, but are not limited to, increased adoption of competing alternative transportation fuel technologies, a general lack of EV adoption, and a general macroeconomic downturn, resulting in financial market declines."

The analyst holds a Sector Weight rating on Tesla with no price target. Erickson does, however, see a fair value estimate of $190 on Tesla with a $300 bull case and a $120 bear case.