Credit Suisse Lowers Tesla's Price Target To $240; 'Choppy Path, But Worth The Wait'

• Tesla Motors Inc (NASDAQ: TSLA) shares have plunged 40.14 percent year-to-date, to a low of $143.67 on Wednesday.
• Dan Galves of Credit Suisse has maintained an Outperform rating on the company, while lowering the price target from $325 to $240.
• Although the company has reported its 4Q15 meaningfully below expectations, Galves mentioned that the 1Q16 and FY16 guidance was in line with the estimates.

Analyst Dan Galves said that Tesla Motors reported loss per share of $0.87 for 4Q15, as compared to the estimate of profit per share of $0.16, “with unabsorbed OH related to low Model X production and higher-than-expected SG&A each about $0.50 of the variance.”

However, the delivery guidance for 1Q16 and FY16 of 16,000 and 80,000-90,000 units, respectively, was in line with the estimates and ahead of the consensus.

The 18 percent sequential increase in opex in Q4, as well as the 20 percent growth for FY16, were worse than expected.

Related Link: Tesla Smashes Unit Delivery Expectations For Q1, Full Year

Galves also mentioned some meaningful positives, such as cash burn significantly improving to about $230 million, as compared to the average of $420 million over the last four quarters.

“And while Bears will point to benefits from reduced Model S inventory, overall inventory stayed flat due to substantial Model X components / WIP that generated no revenue in the qtr,” Galves stated.

Also, with Tesla Motors increasing its Asset Backed Line, the likelihood of a capital raise in the near term has declined, and Galves noted that the toughest part of the Model X launch was now behind the company.

Channel checks indicate that “recent Model X's are arriving at distribution centers with substantially fewer quality issues…and should reduce concern that there is a fundamental buildability issue with the vehicle,” the Credit Suisse report added.

The EPS estimates for 2016 and 2017 have been lowered from $4.00 to $2.00 and from $5.50 to $4.00, respectively.