Yes, says Deutsche Bank’s Dan Galves, who downgraded Tesla Motors’ (TSLA) shares today.Getty Images
Galves explains why he cut Tesla to Hold from Buy following yesterday’s earnings.
But we can no longer justify significant upside on a 12-month view. We lay out a case…that includes an optimistic scenario that Tesla gets to 450k units near the end of the decade at an EBIT margin of 15% (significantly higher than BMW, slightly below Porsche). This would drive about $19 of EPS. Even if Tesla were to get a 20x multiple at that time, the stock should trade at around $250 at the end of 2014 (20x 2019 EPS of $19, discounted back 3 years at 15%). In addition to the tight valuation, we believe the ramp in operating expenses, uncertainty around the giga-factory, uncertainty around distribution network needs to support higher volumes, and multiple competitor vehicles entering the market will make it difficult for investors to get a clear picture of the true late-decade earnings power/margin profile of the company. We'd look to get more constructive again on pullbacks or if the stock remains range-bound for an extended period.
Galves’ downgrade stands in contrast to analysts who were less bullish before today’s report and upgraded their price targets today.
Shares of Tesla have risen 9.5% to $212.10 at 2:44 p.m.