‘Questions remain’: Here’s what Wall Street is saying about Tesla’s earnings

Elon Musk, chief executive of Tesla

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Elon Musk, chief executive of Tesla
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Fred Prouser / Reuters

Tesla reported a mixed-bag in its earnings report on Wednesday, sending shares up more than 10%.

The electric-car maker said it slowed its cash burn and announced revenue that topped Wall Street expectations – but its per share loss was more than anticipated.

While the report led to a few price-target increases and upgrades across Wall Street, most analysts remain skeptical that Tesla can continue without a cash infusion in the near future. The average Wall Street price target held at $317 a share, according to Bloomberg.

Here’s what the Street is saying about Tesla’s second-quarter results:

Goldman Sachs raised its price target, but says Tesla is still overvalued

Price target: $210 from $195

“This was a positive quarter,” analyst David Tamberrino said. “Automotive gross margins, cash burn, and ending cash balance were better than expected. In addition, the company may have turned the corner on its historical operational mis-execution -further noting they have learned from past experiences and expect to improve capital efficiency at new plants going forward (somewhat corroborated near-term by another reduction in 2018 capex guidance). However, improvement from historical launches was also communicated for both the Model X and Model 3 launches.”

UBS says it was a ‘long call’ with ‘few answers’

Price target: $195

“We see capex as pushed to 2019 and likely need to hit the 10k/week target,” analyst Colin Langan said. “We remain cautious on TSLA given challenging sustainable Model 3 profitability & quality concerns. TSLA said it won’t need to raise equity capital; however, we see this as unlikely given the need for service centers and Superchargers with the Model 3 roll out and capacity needs for Model Y, the Semi, & Roadster (China & EU plants in works).”

RBC Capital Markets: ‘A better quarter and a number of positives’

Price target: $315 from $280

“2Q18 results better than expected and we are more comfortable with 2H18 profitability/cash flow,” analyst Joseph Spak said. “Further, there seems to be more ammo for bulls than bears in commentary. Given stock’s propensity to sentiment/momentum, we could see a rally, but remain Sector Perform rated believing a lot priced in.”

Spak also warned that Tesla’s stock price has become “somewhat of an Elon sentiment gauge,” referring to the personality cult surrounding Tesla’s rockstar-like chief executive.

Morgan Stanley asks if investors believe Tesla’s bullish targets

Price target: $291

Morgan Stanley says it rates Tesla quarterly results through three lenses: demand growth, cash consumption, and openness/accessibility of capital markets to fund. Here’s how this quarter fared:

Demand growth: Materially better than expected but still largely based on Tesla’s expectations from here. Tesla’s Model 3 volume forecast is far higher than what we have modeled while S and X guidance is modestly higher,” analyst Adam Jonas said.

“Cash consumption: Better than expected, but…questions remain about sustainability and what measures were taken to achieve it. Sustainability questions involve working capital arrangements with suppliers (that can snap back) and securitization actions.

“Openness of capital markets to fund the plan: Unchanged. If Tesla chose to bring in external funds we would anticipate a range of potential strategic and/or financial options at their disposal.”

Oppenheimer upgrades, citing improved Model 3 margins

Price target: $385 (no previous target)

“While we have been cautious on Model 3 ramp, we believe gross margin performance on Model 3 will carry the stock over the next 12+ months,” analyst Colin Rusch, who upgraded the stock to outperform, said.

“Incremental gross profit for the Model 3 has the potential to generate sufficient cash for TSLA to reach positive operating cash flow. With higher volumes and slower spending, we believe TSLA has reached a critical inflection point in its development. We expect bearish arguments now to focus on limited potential for Model 3 volume at higher price levels. We note that despite some recent price pressure, Model S and X ASPs have remained at relatively elevated levels. We would not be surprised to see a similar scenario play out for Model 3.”

Tesla stock price earnings wall street

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Markets Insider