Barclays Cuts Tesla Target, Warns Slow Model X Ramp Could Hurt Investors

• Shares of Tesla Motors Inc (NASDAQ: TSLA) have declined 38.98 percent over the past six months, dropping to a low of $147.99 on February 8.
• Barclays’ Brian A. Johnson has maintained an Underweight rating on the company, while lowering the price target from $180 to $165.
• While expecting the company to report its 4Q results below consensus, Johnson mentioned that the 4Q print could provide more information on the risks associated with the slow Model X ramp.

Analyst Brian Johnson said, “Although we expect an in-line ’16 guide, we think the slow ramp may challenge deliveries, cash burn, and margins, while also reminding us of risks in the years ahead to Tesla’s aggressive growth ambitions.”

On the other hand, Johnson also believes that there could be opportunity in the near term for the stock to rebound, especially in the event of increased short interest in the stock following the 4Q results and the unveiling of Model 3 in late March.

Johnson does not expect the 2016 guidance to contain any surprises, given the preliminary comments by Tesla Motors regarding margins, deliveries and cash. However, the 2016 estimates are below consensus, partly due to the slow Model X ramp.

“Moreover, we continue to see significant cash burn in 2016, but there is the opportunity for 2Q to be cash flow positive, driven by the initial boost of Model 3 deposits,” Johnson noted.