Key insights
- UBS analyst Joseph Spak maintained a 'neutral' rating on Tesla, with a price target 10% below current levels. While raising Q2 delivery estimates to 405,000 units, this figure could still miss consensus, potentially leading to a stock price decline. However, strong growth in Tesla's Energy Generation and Storage business, which is more profitable than automotive sales, could provide a positive offset during earnings.
Tesla (TSLA 5.69%) stock tumbled 6%.1 through 3:15 p.m. ET Tuesday, one week before Tesla is expected to report its Q2 deliveries number -- and just hours after Swiss megabanker UBS announced it's sticking with only a "neutral" rating on Tesla shares ahead of the report.
A "neutral" rating implies that this analyst is giving Tesla a kind of shrug and a pass on its current valuation. But as StreetInsider.com reports, UBS analyst Joseph Spak thinks Tesla's stock price could decline after deliveries are reported. His price target for the stock, $364, is 10% below Tesla's Monday closing price.
(So maybe Spak should really be advising investors to sell Tesla.)
Why isn't Spak telling investors to sell? For one thing, the analyst is raising estimates for Q2 deliveries from 380,000 electric cars sold to 405,000, representing 5% year-over-year growth.
Problem is, even 405,000 units -- if this is the right number -- could still miss consensus forecasts for the quarter, which Spak estimates range from 400,000 to 420,000 (so 410,000 at the midpoint). This sets up a scenario in which Tesla might do better than Spak expected, but still worse than what most people hoped for in Q2. And this is a scenario that could, in fact, cause Tesla's stock price to decline.
All this said, there's still one scenario in which holding Tesla stock might make sense. Spak points out that the company's Energy Generation and Storage business could report up to 40% sales growth in Q2 -- eight times better than Automotive.
Whatever happens with car deliveries next month, considering that Tesla's been earning twice as much on Energy sales as it has on Automotive lately, this could end up making Tesla a winner on earnings day.