Francois Mori / Associated Press
- RBC Capital Markets analyst Joseph Spak cut his Tesla price target for the fifth time this year.
- Tesla’s gross margins were worse than previously thought, Spak said in a report on Monday.
- The electric-car maker’s capital raise announced last week was needed, but "could have been done earlier from a greater position of strength," the analyst said.
- Watch Tesla trade live.
Tesla’s $2.4 billion recent capital raise has been well-received by Wall Street analysts covering the stock, but it’s not stopping them from tempering their earnings expectations and chopping down price targets.
One such analyst is RBC’s Joseph Spak, who this week cut his Tesla price target for the fifth time in 2019, highlighting the company’s capital raise and its vehicles’ weaker-than-forecast gross margins. He started out the year, on January 2, by lowering his target to $290 from $340 before cutting it again in late January, in late March, in early April, and again this week.
"Funding secured at $240-ish," Spak wrote in a Monday note to clients on, winking at CEO Elon Musk’s infamous "funding secured" tweet he sent last August that led to a legal battle with the Securities and Exchange Commission.
"The additional capital was surely needed but could have been done earlier from a greater position of strength," he wrote, adding the proceeds should fund "what we expect to be a continued cash burn" of around $760 million through year-end and $640 million next year.
Tesla announced the capital raise when shares were trading right around $240 a share.
Read more: Tesla unveils plans to raise about $2 billion
On Monday, Spak cut his price target from $200 to $190 a share, and maintained his "underperform" rating. That target makes him among the most bearish Tesla analysts on Wall Street, according to those polled by Bloomberg.
"The larger part of potential demand for Tesla products is at a price point where we do not believe Tesla can be profitable," Spak wrote. "The company has begun to offer some of these price points, but we believe they will be dilutive to margins."
He expects Tesla to post a full-year 2019 loss of $6.58 a share, worse that his previous expectation for a loss of $5.71 a share, before that narrows in 2020 and reaches profitability in 2021. Spak also expects revenue to come in a bit lighter than previously forecast — he now sees $22.9 billion of sales in 2019 compared with his prior outlook of $23 billion.
Spak wasn’t alone in adjusting his outlook for the company this week. Another bearish analyst, JPMorgan’s Ryan Brinkman, also cut his earnings expectations in a note on Monday.
Tesla shares were up 1% early Tuesday. They were down 23% this year.
Now read more Tesla coverage from Markets Insider and Business Insider:
A vocal Tesla bull says he can no longer ‘look investors in the eye’ and recommend the stock
Tesla posts huge loss, says deliveries are still on track despite ‘aggressive schedule’
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Source: Business Insider – rungarino@businessinsider.com (Rebecca Ungarino)