Tesla stock (NASDAQ:TSLA) is proving quite resilient on Thursday morning, maintaining its gains despite the release of a more conservative outlook from one of the company’s most notable bulls. In a recent note, Baird analyst Ben Kallo, who has long held a bullish outlook on the company, adopted a more conservative price target and earnings per share estimate on Tesla.
In a note, Kallo lowered his price target for TSLA stock from $465 to $400, which is more conservative but still about 25% above FactSet’s average of $318 per share. The Baird analyst explained that Tesla’s lower-than-expected first-quarter deliveries proved insufficient to change the negative sentiments against the company today. “We were wrong. Disappointing first-quarter deliveries were not sufficient to improve what we believed was overly negative sentiment,” he wrote.
Apart from his more conservative $400 per share price target, Kallo also adjusted his earnings per share estimates for 2019 and 2020 to $1.82 and $6.92, respectively, from $3.67 and $12.15. These new estimates are closer to current Wall Street consensus. Yet, despite his more cautious stance in the near-term, Kallo maintained that his long-term expectations for Tesla remain optimistic. The Baird analyst noted that Tesla is still poised to be a “major disruptor,” though it might take some time before sentiments for the company improve.
“We continue to view Tesla as a major disrupter and think new product introductions, production ramps, and further development of innovative technologies will drive growth. While we acknowledge it may take time for sentiment to improve, over time we think shares will move higher as the company executes on its growth strategy,” Kallo wrote.
Tesla stock has been weighed down by the results of its Q1 2019 vehicle delivery and production report, which saw electric car deliveries fall by around 30% compared to Q4 2018. Production in the first quarter was also around 12% lower than the previous quarter’s figures, with the company producing a total of 77,100 vehicles. These figures, together with continuing questions about the demand for the company’s vehicles, have resulted in a notable slide for TSLA stock this month.
Some of these reservations will hopefully be addressed this coming April 24, when Tesla holds its first-quarter earnings call. Elon Musk has proven conservative about Tesla’s chances in Q1, stating during the introduction of the Standard Model 3 that he does not expect the company to be profitable in the first quarter. “Given that there is a lot happening in Q1, and we are taking a lot of one time charges, there are a lot of challenges getting cars to China and Europe, we do not expect to be profitable. We do think that profitability in Q2 is likely,” Musk said.
As of writing, Tesla stock is trading (+0.92%) at $273.72 per share.
Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.
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Author: Simon Alvarez