UBS's Colin Langan, one of the Street's more notable Tesla bears, maintains a Sell rating and $160 price target on Tesla's stock ahead of the earnings report. The analyst's continued cautious stance stems from the company's history of delays in launching new products; investors are expected to "react strongly" to any Model 3 timing updates.
Few Encouraging Developments
Langan is also expecting investors to focus on Tesla's ongoing cash burn, which he estimates will accelerate from negative $800 million in the fourth quarter to negative $1.2 billion in the first quarter.
Accordingly, the analyst is modeling Tesla's earnings per share to drop $0.21 quarter-over-quarter to negative $0.90 per share in Wednesday's report. This estimate assumes a full quarter of solar inclusion from the SolarCity acquisition, negative pricing and higher operating expenditures ahead of the Model 3 production launch. These factors are only partially offset by improvements in volume and deferred Autopilot revenue.
Bottom line, Langan believes Tesla's current valuation implies it will:
- Sell 2 million auto units in just 10 years, or equal to BMW's sales figures today and just shy of Mercedes Benz's sales of 2.4 million units.
- Achieve a mid-teens operating margin target versus a 7-percent average for the auto sector.
- Achieve just a 3-percent annual dilution in the stock, a difficult task given Tesla's "significant" capital needs.
- Maintain a multiple of 25x earnings in 10 years.
- Expand Tesla's dealership and charging network.
- Remain relevant and compelling to consumers as major luxury car markets are entering the electric vehicle market in the 2018 to 2020 period.
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Image Credit: By Steve Jurvetson - →This file has been extracted from another file: Candy Red Tesla Model 3.jpg, CC BY 2.0, via Wikimedia Commons
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