Wall Street Analysts Still Divided On Tesla Following Record Deliveries

After a brutal start to 2019, Tesla Inc TSLA helped ease investor concerns on Tuesday when the company reported 95,200 vehicle deliveries in the second quarter, slightly above the midpoint of its guidance range and well above consensus Wall Street expectations. Tesla had previously guided for between 90,000 and 100,000 deliveries in the quarter, but analyst expectations had fallen to around the 90,000 level prior to Tuesday’s announcement.

Tesla also reported producing 87,048 vehicles in the quarter, and its 95,200 deliveries were a new record for the company.

Several analysts weighed in on Tesla following the latest set of numbers. Here’s a sampling of what they’ve had to say.

Demand Healthy...For Now

Canaccord Genuity analyst Jed Dorsheimer said second-quarter orders exceeded deliveries, a key indication that demand was healthy.

“We view the strong delivery numbers as further evidence that much discussed ‘demand cliff’ theory is flawed and believe that Tesla is well positioned to capitalize on the inflection higher of EV penetration rates,” Dorsheimer wrote in a note.

Loup Ventures' Gene Munster said the second-quarter deliveries number marks a turning point for Tesla demand.

“This represents a record for both production and deliveries and a strong sign that the demand for Tesla vehicles, especially Model 3, is as strong as ever,” Munster wrote.

JMP Securities analyst Joseph Osha said investors can expect Tesla’s cash balance to increase when it reports second-quarter earnings.

“On a more normalized basis, we would say TSLA should be running at near FCF breakeven, assuming it spends $625 million on capex in Q2,” Osha wrote.

Profitability In Focus

Bank of America analyst John Murphy said Tesla’s second-quarter deliveries did little more than exceed low expectations, and the company failed to reiterate its previous full-year deliveries guidance of between 360,000 and 400,000 vehicles.

“In our view, this could set up for a short squeeze, as 2Q:19 deliveries were slightly ahead of more pessimistic Street expectations, and profits/losses and cash flow/burn could also come in slightly better,” Murphy wrote.

RBC Capital analyst Joseph Spak said Tesla cleared the second-quarter deliveries hurdle, but profitability and long-term demand remain uncertain.

“The next catalyst is earnings where the focus will shift to auto gross margins, cash flow and sustainability of demand,” Spak wrote.

Wedbush analyst Daniel Ives said the delivery number is a clear step in the right direction for Tesla, but the company still has plenty to prove.

“While the bulls will rightfully cheer this report tomorrow morning on the heels of this better than expected delivery number, the stock and future of Tesla all resides on the sustainable demand going forward and elusive profitability profile, which continues to be a major concern on the name” Ives wrote.

Ratings And Price Targets

• Bank of America has an Underperform rating and $225 target.
• Canaccord Genuity has a Buy rating and $394 target.
• JMP has an Outperform rating and $347 target.
• RBC has an Underperform rating and $190 target.
• Wedbush has a Neutral rating and $230 target.

Tesla's stock traded higher by 5.5% to $236.91 per share at time of publication.

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Photo courtesy of Tesla.