Tesla analysts look beyond strong deliveries to advocate caution

Tesla Inc. shares soared in pre-market trading after the electric vehicle maker’s first-quarter delivery numbers impressed investors.

Yet, even though the better-than-expected results suggested demand for Tesla cars remained strong, both bullish and bearish analysts warned that the company will not escape unscathed as the novel coronavirus pandemic brings demand for autos across the world to an abrupt halt.

The company did not provide any update to its full-year delivery guidance, or on profitability or liquidity, something that the market had hoped to see amid the extreme uncertainties brought on by the Covid-19 crisis.

“The company also did not break out any quantitative metrics around China or Model Y production and sales, which will likely disappoint both bulls, who see these as massive growth opportunities, and bears who are skeptical of demand in the other regions and demand for the Model 3," Cowen analyst Jeffrey Osborne said.

Tesla shares jumped 16% in pre-market trading to $528.

Here’s a round-up of the analyst comments on the delivery figures.

Bernstein, Toni Sacconaghi

“Fist-quarter deliveries reaffirm strong market demand for Teslas."

“88,000 units was only 10,000 shy of our pre-Covid 19 forecast for the quarter, suggesting underlying demand was at least tracking in-line – and likely ahead – of our expectations, and grew 40% year over year, despite headwinds such as the expiration of U.S. and Dutch EV incentives."

“Tesla’s multiple is predicated on its growth profile, and strong first-quarter deliveries despite the shock of coronavirus – is clearly positive/reassuring."

Wedbush, Dan Ives

“With the second half of March seeing a screeching halt in demand across the globe given the current pandemic, the big question for investors going forward is around the demand trajectory for 2Q/rest of the year and cash burn."

“It appears China production and demand are starting to rebound and should be a key growth driver over the coming quarters, although clear challenges remain in the months ahead as Tesla navigates this treacherous consumer landscape and spending environment abound."

“While cash burn will be heightened in the near term due to this anomalous global situation, we believe the longer-term trends remain very healthy and $20 of annual earnings power down the road is achievable."

Rates neutral, with a price target of $425.

RBC, Joseph Spak

“We don’t dismiss that Covid-19 and the ‘shutdown’ impacted Tesla deliveries, but we’ve heard some very low forecasts over the past week (in the 60,000 range) that have significantly, and in our view, unrealistically, lowered expectations."

“We hesitate to even really call this a ‘beat."’

Rates underperform.

Cowen, Jeffrey Osborne

“Deliveries came in better than our expectations, reflecting a stronger end of quarter push than our Covid-19 adjusted estimates, but production utilization was quite low in the quarter compared to stated capacity levels - even factoring in stated shutdowns."

“Free cash flow in first quarter likely not as bad as we feared, but second-quarter setup still looks rough, and we still expect a U-shaped recovery in 2H of 2020."

Rates underperform, price target $285.

Needham, Rajvindra Gill

“Despite the strong numbers, we remain cautious on Tesla’s deliveries for the remainder of 2020, as automotive demand has largely collapsed in North America and Europe due to the impact of Covid-19."

“It is unclear when the Fremont factory will be back online, significantly hampering Tesla’s production capacity."

“In the long-term, we continue to expect margin pressure from declining sales of higher-margin Model S & X vehicles, a lower mix within Model 3, and competitive pressures from other automakers as they launch their electric vehicles over the next few years."