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Lackluster demand and overseas Model 3 delivery problems will weigh on Tesla's first-quarter earnings results when the company reports in April, RBC Capital Markets warned clients Monday.
The brokerage cut its first-quarter Model 3 delivery forecast to 52,500 from 57,000 and slashed its price target to $210 from $245, a 14 percent reduction that implies more than 20 percent downside over the next year.
"We see both 2019 and 2020 revenue as down vs. the 4Q18 run-rate and, given Tesla is priced for growth, believe the valuation will come in," analyst Joseph Spak wrote in a note to clients. "Overall, for 2019 we now forecast about 261,000 Model 3 [deliveries], down from 268,000 prior. Our 2020 forecast of 347,500 remains unchanged."
Spak, who has an underperform rating on Tesla shares, predicts the electric car maker will post an adjusted loss of 64 cents per share, down from a prior estimate of a profit of 68 cents per share.
"Regionally, we assume 21,000 units in Europe, 6,000 to 7,000 in China and the remainder in North America," Spak wrote. "In China, some deliveries were delayed because of a customs issue."
The analyst cited recent price cuts to its popular Model 3 as evidence both of diminished demand and in reducing his earnings outlook.
"Our 2019 Model 3 average selling price is now $53,600, down from $55,500 prior – still stronger in the first half as Tesla fulfills higher-end demand internationally before lower priced models (which carry lower gross margin) kick in," Spak said.
Chief executive officer Elon Musk surprised some investors last month after he said Tesla will only sell cars online and that drivers will have up to a week to return their vehicles if they aren't satisfied. Of particular angst to some stakeholders, Tesla explained that moving sales online will allow the Model 3 to sell at the long-awaited base model price of $35,000.
However, Musk tweeted on Sunday that
"The larger part of potential demand for Tesla products is at a price point that we do not believe Tesla can be profitable," he added. "The company has begun to offer some of these price points, but we believe they will be dilutive to margins."
Tesla shares fell 2.1 percent in premarket trading Monday following the RBC note. The stock is already down 30 percent from it's recent 52-week high and 20 percent in 2019 alone.