Demand for Tesla Inc.’s cars is expected to see more pressure amid increasing competition, the phase out of a federal tax incentive and an aging product lineup, Evercore ISI analyst Arndt Ellinghorst said on Monday.
Ellinghorst downgraded the shares to the equivalent of a sell rating from hold, saying “growth cannot stall for a growth company.” It’s the stock’s fifteenth sell rating among 36 analysts tracked by Bloomberg. Tesla shares dropped 2 percent in pre-market trading.
“As growth estimates are coming down, valuation multiples should trend lower,” the analyst said, adding that investors would possibly look through Tesla’s Autonomy investor day to be held later on Monday, until they see more evidence of progress on the business model. Ellinghorst also lowered his price target on the stock to $240 from $330, and cut his delivery estimate for 2019 to 369,000 units from a previous 402,000.
Read more: Tesla to Talk Up Future Potential as Market Awaits Report Card
Tesla now needs to focus on two key factors: a proper capital raise that can shore up its balance sheet, and an improved or “more thoughtful” strategic decision making process, the analyst said. “We believe Tesla is missing a critical and sustainable layer of middle/upper management and that Tesla should hire and empower more executives with auto experience,” Ellinghorst said.
Separately, Wedbush analyst Daniel Ives said that while the autonomy event is expected to reveal positive developments, “clearly the elephant in the room is first-quarter earnings around the corner this Wednesday after the bell, which based on delivery numbers released and the cost trajectory is expected to be a train wreck quarter.”
Analysts on an average expect a loss of 90 cents a share for the quarter, on revenue of $5.27 billion, according to data compiled by Bloomberg.