Tesla will lose a quarter of its value after production falls short of Street expectations: Jefferies

by Dramelin 7:00 AM 0 comments

Tesla`s market-crushing performance this year will not last, according to one Wall Street firm.
Jefferies told its client to avoid the electric car maker`s shares, saying the company`s financial performance will be weak in the coming years.
"It is with a bit of a heavy heart that we initiate coverage of Tesla at underperform," analyst Philippe Houchois wrote in a note to clients Tuesday.
"Achievements to-date and vision are impressive, but we don`t think Tesla`s vertically integrated business model can be scaled up as profitably and quickly as consensus thinks and valuation multiples imply.
" The analyst set a 12-month price target for Tesla shares at $280, representing 27 percent downside from Monday`s close.
Houchois predicts Tesla will continue to lose money on an annual basis through 2019.
He has "doubts about Tesla`s ability to generate 30+% gross [profit] margin required to support its vertically integrated business model in distribution/supercharging.
" The electric car maker`s shares are outperforming the market this year, up 80 percent year to date through Monday compared with the S&P 500`s 12 percent return.
"Given capital intensity, we don`t think DCF [discounted cash flow] can justify the current valuation, let alone upside," he wrote.
"We appreciate the growth upside from a brand whose reach goes well beyond auto markets and that valuing Tesla today assumes some form of `steady-state` that is unlikely to happen anytime soon.
" Tesla did not immediately respond to a request for comment.
Its shares are down 2 percent in the Tuesday premarket session after the call.
— CNBC`s Michael Bloom contributed to this story.