Tesla, Inc. (NASDAQ: TSLA) shares have not been spared in the marketwide selloff seen so far this year. In a further blow, an analyst known for being bullish on the EV maker lowered his price target on its stock.
The Tesla Analyst: Piper Sandler analyst Alexander Potter on Tuesday maintained his "overweight" rating on Tesla stock, but reduced the price target from $1,260 to $1,035.
This is a back-to-back price target cut from Potter, who in late April lowered the price target from $1,350 to $1,260.
The Tesla Thesis: The reasons behind the cut are COVID-related weakness in China and a higher weighted average cost of capital assumption, Potter said in a note.
Key financial metrics will likely deteriorate in the second quarter due to fixed cost de-leveraging, the analyst said. New gigafactories in Berlin and Texas will drag margins, he added.
Potter flagged potential deterioration in cash generation but sees this as having only a short-term impact. The wait times for different variants of Model 3 and Model Y suggest steady demand, the analyst noted.
He lowered his 2022 vehicle delivery estimate from 1.54 million units to 1.47 million units, citing the COVID-19 hit to Giga Shanghai production.
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Potter does not see Berlin and Austin making up for the Giga Shanghai shortfall in the second quarter. He noted that Giga Berlin is now building only 7,500 units/quarter.
Citing the tempered deliveries expectation and operating deleverage, the analyst cut his margin estimates for Tesla. Due to higher treasury yields, the analyst increased his WACC assumption by 100 basis points to 13%.
Potter, however, said he still regards Tesla as a "cornerstone holding in any advanced mobility" portfolio.
Any weakness, according to the analyst, may bring in new buyers. Downside due to temporary factors will not detract from the longer-term thesis, he added.
Price Action: Tesla closed Tuesday's session 5.14% higher at $761.61, according to Benzinga Pro data.
