🎈 Up Big Today: Find today's biggest gainers with our free screenerTry Stock Screener

Barclays Sees Q2 Risk for Tesla but Says 'Market May Swing Trade Shares Up'

Published 06/10/2022, 02:21 AM
Updated 06/10/2022, 06:53 AM
© Reuters.  Barclays Sees Q2 Risk for Tesla (TSLA) But Says 'Market May Swing Trade Shares Up'
TSLA
-

By Senad Karaahmetovic

Barclays analyst Brian Johnson sees Tesla's (NASDAQ:TSLA) Q2 earnings coming in below expectations.

The analyst reiterated an Underweight rating on Tesla and hiked the price target to $370.00 per share, from $325.00, on higher baseline auto earnings.

“As Tesla CEO Elon Musk grapples with outside business pursuits, the company’s 2Q production and margins are set to disappoint as Shanghai shackles output. Indeed, we now expect sales and production to contract Q/Q (vs consensus expecting growth) with Shanghai’s ramp to pre-lockdown levels taking longer than expected and, to a lesser extent, Texas and Berlin experiencing slower-than-expected ramps. We reduce our 2Q EPS to $2.08 from $2.72 and $2.19 consensus, as our 2Q delivery estimate falls to 251k from 315k prior and 303k consensus,” Johnson told clients in a note.

The analyst also discussed the slower-than-expected ramp in both Berlin and Texas.

“Tesla’s Berlin factory appears to be facing several issues including quality, supply chain, and lack of 2nd shift employees…It appears Tesla has only achieved a daily production rate of ~86 units/day as of mid-May, with the company planning for ~350 units/day from the second half of July with localized production of drive units expected to begin this month. For Texas we lower our 2Q production forecast to 5k units, from 17k, as Tesla may be struggling with new manufacturing processes related to the 4680 structural battery pack and Giga casting,” Johnson added.

Despite the evident Q2 risk due to China lockdowns, the analyst argues that “the market may swing trade TSLA shares up as it puts a Covid-driven poor 2Q in the rear view mirror.”

Moreover, Johnson is also confident that the company will still record positive FCF in Q2 as “bearish expectations for negative FCF in the quarter are overdone.”

On job cuts, the analyst says Musk’s internal memo fits with Q2 EPS/FCF risk.

Earlier today, Reuters reported that Tesla expects to see its Q2 production output from the Shanghai plant fall by a third. Read more here.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.