KeyBanc: The Good And Bad From Tesla's Q1 Report

Tesla Inc TSLA's first-quarter report Wednesday had multiple data points for both bulls and bears to highlight, according to KeyBanc Capital Markets. 

The Analyst

KeyBanc's Brad Erickson maintains a Sector Weight rating on Tesla's stock with no assigned price target.

The Thesis

Bullish investors will be happy that Tesla's earnings report showed the following, Erickson said:

• The company is unlikely to need to oversee a capital raise this year.
• GAAP profitability and positive cash flow is likely in the bottom half of 2018.
• Long-term Model 3 gross margin targets were raised to the high-20s by late next year.
• Model 3 reservations were maintained at 450,000-plus, and 10,000 deliveries were completed so far.

On the other hand, bears would point out:

• Tesla CEO Elon Musk's mishandling of analyst questions during the conference call.
• Model 3 production targets were pushed back for the fourth time since production started.
• Capital expenditure reductions should yield a slower push beyond 5,000 Model 3 units per week.

Tesla's stock appears to be "a bit oversold" due to a low Model 3 profitability bar for the company to achieve, a "solid and likely improving" demand environment and encouraging production announcements in the coming quarters, the analyst said

Longer-term valuation sensitivity and an "unfavorable" conference call justifies a neutral stance on the stock, according to KeyBanc. 

Price Action

Shares of Tesla were trading lower by 6.69 percent before the open Thursday. 

Related Links:

KeyBanc Lowers Model 3 Estimates Ahead Of Tesla's Q4 Report

What Wall Street Expects To See In Tesla's Q1 Earnings

Photo courtesy of Tesla.