Wells Fargo analyst Colin Langan slapped Tesla with an underweight rating and set a measly $120 price target for the electric car maker. The analyst predicts Tesla will report a disappointing second quarter earnings per share of just 20 cents, missing Wall Street expectations of 41 cents by a huge margin. Lower electric vehicle credits and weaker energy business profits will drag down the company's performance. Langan expects Tesla to bring in $650 million in credits during the second quarter, up slightly from the first quarter's $595 million. Energy business profit margins will likely shrink from 29 percent to 24 percent because of tariffs on Chinese imports.
Tesla's car business margins should bounce back to 13 percent from the recent low of 12.5 percent in the first quarter. Federal tax credits for electric vehicles will end on September 30, while solar energy system credits expire December 31. The credit cutoff will create a temporary boost in third quarter sales before demand crashes in the fourth quarter. Langan predicts Tesla will deliver more than 400,000 vehicles in the third quarter but then see a massive drop in the fourth quarter. The company will likely cut prices by 4 percent in the fourth quarter to offset the loss of federal credits.
Trump's legislation eliminated penalties for automakers who fail to meet fuel economy standards, which devastated demand for regulatory credits. These credits made up 32 percent of Tesla's operating profits last year. Langan expects regulatory credits to fall from $1,800 per vehicle to just $900 per vehicle by the fourth quarter.
Tesla's car business margins should bounce back to 13 percent from the recent low of 12.5 percent in the first quarter. Federal tax credits for electric vehicles will end on September 30, while solar energy system credits expire December 31. The credit cutoff will create a temporary boost in third quarter sales before demand crashes in the fourth quarter. Langan predicts Tesla will deliver more than 400,000 vehicles in the third quarter but then see a massive drop in the fourth quarter. The company will likely cut prices by 4 percent in the fourth quarter to offset the loss of federal credits.
Trump's legislation eliminated penalties for automakers who fail to meet fuel economy standards, which devastated demand for regulatory credits. These credits made up 32 percent of Tesla's operating profits last year. Langan expects regulatory credits to fall from $1,800 per vehicle to just $900 per vehicle by the fourth quarter.
