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Analysts Have Mixed Reviews After Tesla Motors Inc (TSLA) Posts Earnings

By Shira Gonen

Tesla Motors Inc (NASDAQ:TSLA) posted third quarter fiscal 2015 earnings on Tuesday after market close, posting non-GAAP revenue of $1.24 billion and loss per share of ($0.58), marking a 33% revenue increase from the same quarter of last year. Although these figures missed analyst predictions for revenue and earnings of $1.26 billion and ($0.48) respectively, shares rose 7.27% to $223.80 the next morning. The electric car company posted a non-GAAP net loss of $75 million this quarter, attributing this to the high rate of cash-flow associated with its Model X production, citing high overhead costs.

In Q2, Tesla predicted full year deliveries of 50,000-55,000 vehicles, lowering the high end of its estimate to 52,000 after production challenges in Q3. In order to meet this minimum quota, Tesla must deliver at least 17,000 more vehicles before year end, as it has only delivered 33,000 so far. Despite this setback, the company surpassed its Q3 production goal of 12,000 vehicles, producing 13,091 vehicles and delivering 11,603, appeasing wary investors and generating mixed reviews from analysts. Tesla plans to deliver 17,000-19,000 vehicles in Q4 to meet its yearly goal, but warned investors of “uncertainty” as they anticipate challenges acquiring supplies. However, the company states that “emphasizing quality is the right decision for our customers.”

Following earnings, analyst James Albertine of Stifel Nicolaus maintained a Buy rating on Tesla with a price target of $400. He attributes this rating to Tesla’s updated production forecast and ambitious Q4 delivery goals. He states, “We believe the highlight from 3Q15 helping to drive a positive (roughly +10% per FactSet) after-hours reaction in TSLA shares is the updated guidance for 50-52k units delivered in FY15. While this is lower than previous guidance for 50-55k deliveries, we believe TSLA’s target for 17-19k deliveries is better than expected.”

Overall, Albertine has a 54% success rate recommending stocks with a + 6.0% average return per rating.

On the other hand, Ryan Brinkman of JP Morgan reiterated his Sell rating on Tesla after the company released earnings with a price target of $180. The analyst notes that Tesla has a “persistently high rate of cash outflow.” According to Brinkman, Q3 revenue and operating income did not balance the high rate of cash burn this quarter. Since Q3 cash burn surpassed his expectations, the analyst found this worrisome.

Overall, Brinkman has a 65% success rate recommending stocks with a +14.4% average return per rating.

According to TipRanks, 18 analysts have rated Tesla over the last 3 months. Of these analysts, 8 rated the stock a Buy, 5 rated the stock a Sell, and 5 remained on the sidelines. The average 12 month price target for Tesla is $296.80, marking a 28.14% upside from where the stock last closed.