Tesla Downgraded At Baird, Firm Sees Model X Deliveries 'Unclear'

• Tesla Motors Inc TSLA shares have appreciated 14 percent in the last six months, when they touched a low of $203.
• Baird’s Ben Kallo downgraded the rating on the company to Neutral, while reducing the price target from $335 to $282.
• Uncertainty related to the timing of a production ramp of the company’s new model and its higher-than-expected price are concern areas, Kallo noted.

Analyst Ben Kallo mentioned that the launch of Tesla’s Model X is “an important milestone,” which increases the company’s brand value and credibility. Although the company should be able to ramp up the production of the new model, the timing for the same is uncertain in view of the current market scenario, he added.

Not only is the timing of the initial X deliveries uncertain, the production ramp could take longer than expected, Kallo stated, adding, “Given the complexity of the vehicle, we believe the ramp will be slower than expected, which could impact 2015/2016 vehicle delivery estimates.”

Production of Model X on the same final assembly-line as the S could impact Tesla’s total vehicle production. The Baird report stated that the higher-than-expected price of Model X may also result in the cancellation of some orders and reduce the market size.

Kallo believes that the absence of any near-term catalysts could exert pressure on Tesla’s shares and that the next major catalyst is the introduction of the prototype of Model III, not expected until March 2016.

The non-GAAP EPS estimates for 2016 and 2017 have been reduced from $3.00 to $2.00 and from $6.07 to $4.70, respectively.