Why Roth Capital Downgraded Tesla to Neutral

Why Roth Capital Downgraded Tesla to Neutral



ruff Capital Partners seeing problems in Tesla's broader line up running the following note the largest risk for Tesla is potential for delays or other complications of new vehicles cannibalization a Model S and excels by model 3 delivery seems to be a material headwind suggesting the upcoming model y launch might not be as market expanding as anticipated I want to bring in the author of that note Craig Irwin Roth capital planners senior research analyst recently downgrading the stock Craig I want to talk about that downgrade it was before the earnings actually came out so frame it for our listeners if you can and our viewers what's the story yeah so we had turned constructive slightly above $200 a share we felt the the buy side was just way too bearish people are talking about extremely pretty scenarios but we did not see bring out and if you look at the 600 million dollars a supporter looks like they probably could have squeaked through without the the capital race in the quarter you know we did turn constructive just you know a short number of weeks back but coming into earnings the stock had rallied so hard we felt that risk/reward was a really well priced you know in you know 250 look dollar level about and felt that it was it was right to communicate that Craig record deliveries for the quarter and then a bigger deficit margins coming down and model 3 seems to be the issue here Craig should we just get used to lower margins at Tesla and are you convinced of the optimistic story at all the Elon Musk is trying to sell so the answer the simple answer to your question is yes about 40% of the cost of their vehicles is the battery and we've talked to many of the world's largest producers and buyers of lithium battery material and they're all talking about battery price increases this year somewhere in the 5 to 15 percent range if you take the midpoint that's the reason that we've seen really the significant deterioration in margins of Tesla over the course of the last year you know they had 50 percent sequential growth in unit deliveries in the second quarter and actually saw 30 basis points in margin erosion you three costs are high there's a very little limited visibility on that coming down much over the next you know several quarters hey Craig before we let you go I've got to get your thoughts on the change at the top or at least near the top the co-founder stepping to the side becoming an advisor Craig how significant is that just in terms of day-to-day operations you know I think the quality of Tesla's engineering teams is superior I think they have a wide bench of individuals that can step in and and meet the meet the demands of the CTO position you know I'm not worried about Judy stepping to the side he's done a great deal of service to the company and the industry as a whole and you know he wants to move on and do other things I'm good with that

4 thoughts on “Why Roth Capital Downgraded Tesla to Neutral

  1. Elon Musk hasent proven he has more impact than Steve Jobs on Apple? Right now their mad because Elon is trying to sell model 3 with lower profit margins, as its a base model? I get thats not great for greedy people, but its also estalishing long term confidence in the brand for consumers. Wheres the cost analysis on that?

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