The analysts at Argus revised the production forecast for Tesla Motors Inc, manufacturers of electric vehicles, downward from 60K to 50K on the back of some hitches in the manufacture of Model X.
Earlier, the company reported a $.0.48 per share loss published in its financial result for the second quarter of FY2015, which was lower than $0.60, the average loss per share in the Street. The company also revised its vehicle delivery target from 55, 000 units to between 50,000-55,000 units.
Following the results, William Selesky of Argus further increased the loss per share estimate of Tesla Motors from $0.14 to $0.90. The Argus analyst also reduced the Financial Year 2016 forecast of the company’s Earnings Per Share (EPS) from $3.28 to $2.26 driven by higher production costs. Argus’ expectation is more bearish than that of the Street’s, which forecasts a loss per share of $0.81 and for EPS for FY16; the Street forecast is $2.47.
The research company believes that the short-term earnings and sales are quite unpredictable and it continues to remain wary about the earnings in Financial Years 2015 and 2016. The primary factors that contributed for the downgrade include the effect of low fuel prices on sales of electric vehicles, Tesla’s production shortfalls and operating losses.
However, Argus maintained a Hold status on Tesla’s shares because it believes that the long-term earnings have immense potential for growth. The analyst firm has forecast a long-term earnings growth rate of a whopping 105% for the EV manufacturer. Moreover, despite this year’s downward revision in production, the year –on-year (YoY) growth rate is still more than 60%.
Mr. Selesky of Argus also emphasized Tesla’s recent initiative on equity financing. The company increased its equity offerings to $650 million from $500 million as it strives to keep its global expansion plans on course. The expansion strategy includes growing its Supercharger stores and network and global growth of its Model 3, Model X, Tesla Energy and Gigafactory. After the enhanced equity offering, Argus gave a medium rating for Tesla’s financial strength as against a B/Stable rating from Standard & Poor.
The company’s debt in the second quarter of FY15 was up to $2.67 billion from $2.43 billion in the second quarter of FY14 reflecting its investments in new manufacturing facilities. Cash and cash equivalents came down from $2.67 billion in 2QFY14 to $1.15 billion in2QFY15. Negative cash flows increased to $159.15 million in 2QFY15 from $3.6 million in 2QFY14. Data compiled by Bloomberg says that out of the 22 analysts who covered Tesla Motors, 10 have taken a ‘Buy’ stand, 7 recommend a ‘Hold’ and five of the analysts advice ‘Sell’. s