Barclays Analyst Says Tesla Is No Apple

Following the launch of the $35,000 Model 3, the Tesla Inc TSLA bull thesis may have shifted, according to one Wall Street analyst.

The Analyst

Barclays analyst Brian Johnson reiterated his Underweight rating for Tesla and lowered his price target from $210 to $192.

The Thesis

Johnson said Tesla bulls have historically compared the company to Apple, Inc. AAPL and its luxury vehicle models to the iPhone. The new low-priced Model 3 suggests the comparison is no longer appropriate.

“Much of the bull narrative has rested on Tesla being the next Apple, selling high-volume EVs at premium price point and at high gross margins, in part aided by a unique branded retail presence – a narrative we see as undermined by the recent price cuts and closing of most of the stores,” Johnson wrote in a Tuesday note.

Johnson said a push toward higher-volume, lower-margin sales growth has shifted the Tesla bull thesis from Tesla becoming the Apple of the auto industry to Tesla becoming the Amazon.com, Inc. AMZN of the auto industry. He said Tesla’s advantage over legacy auto makers could potentially be its online-only sales approach, similar to Amazon’s e-commerce approach to retail.

Unfortunately, Johnson isn't buying that argument.

Gross margins will be much lower once the lower-price Model 3 becomes available, and Tesla will need a significant amount of volume growth to make up for shrinking margins, Johnson said. At the same time, the stock is priced at an extremely high sales multiple for what may end up being a low-margin earnings profile.

Johnson said the earlier-than-expected launch of the $35,000 Model 3 could be a red flag that Tesla is running low on cash, potentially due to a weak January and February on the sales front.

Price Action

Tesla's stock traded lower by 4.2 percent Tuesday morning and is down 24 percent in the past three months. Shares traded around $273.36 at time of publication.

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