Tesla is lower after analysts point to Shanghai challenges, Twitter overhang
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Tesla (NASDAQ:TSLA) fell in early trading on Tuesday amid concerns the electric vehicle maker will hit more potholes as it tries to bring the Shanghai Gigafactory back up to a pre-lockdown level of production. The challenge for Tesla (TSLA) hitting full production is that Shanghai still has restrictions in place before a planned complete lifting of the lockdown on June 1. There is also no indication that Beijing is moving away from a zero-tolerance COVID policy.
On Wall Street, Daiwa lowered its price target on Tesla (TSLA) to $800 from $1150 as it pointed to the impact of the lockdowns in Shanghai and supply chain concerns impacting ramp-up of Austin and Berlin plants. The firm lowered its expectation for 2022 EPS to $9.30 from $12.00 and forecasts 2023 EPS of $14.50 vs. $15.00 prior. Daiwa now sees Tesla making deliveries in 2022 of 1.2 million units vs. the prior forecast for 1.4 million units. "With about 13,000 units of production per week and higher than average margins, any production loss at Shanghai is bound to have a significant impact on margins and earnings," warned analyst Jairam Nathan.
Wedbush Securities is also out with comments on the impact of the Elon Musk-Twitter saga on TSLA.
"This circus show has been a major overhang on Tesla's stock and has been a black eye for Musk so far how he has handled this spiraling situation in our opinion with the world watching," noted analyst Dan Ives.
"We believe with the Twitter shareholder meeting on the horizon and approval for the deal expected, Musk is facing a fork in the road situation in which he has to decide his next step in this soap opera as Tesla investor patience is wearing very thin," he added.
Meanwhile, Bernstein did the math on the Twitter deal and said if it closes at the current price and Musk pledges essentially the entirety of his unencumbered shares towards the margin loan, there could be risk of a margin call if Tesla shares fell materially. Analyst Toni Sacconaghi noted that the margin loan comes with a loan to value margin call level of 35% and a reset level of 25%, which means that if at any point the loan to value ratio exceeds 35%, then Musk would have to provide enough incremental capital to bring the loan to value ratio at or below the reset level of 25% which presumably would come from the sale of existing TSLA shares. While the margin call would take a very sharp drop in TSLA's share price, Bernstein calls it a current overhang on the stock.
Shares of TSLA declined 2.70% premarket to $656.69 vs. the 52-week trading range of $571.22 to $1,243.49.