Tesla earnings are almost here and the electric vehicle maker’s stock has been dealt another blow. Roth Capital Partners has downgraded Tesla stock from buy to hold, as analyst Craig Irwin believes that the current risk-reward ratio seems “well balanced at current levels.”
Irwin told MarketWatch that Tesla is on a “viable path for meeting at least the low end” of its 2019 guidance range for 360,000 to 400,000 deliveries. But the fact that the analyst has still cut his rating on Tesla stock indicates that he sees something amiss.
The knives are coming out against Tesla
Irwin has a $238 price target on Tesla stock, indicating that he doesn’t expect more upside as compared to the current levels.
That’s because the Roth Capital analyst is of the opinion that Tesla stock could trade in a range. He points out that the Elon Musk-led company needs to finds a solution to fight the margin challenges arising out of higher battery costs and the growing competition in the EV space.
As it turns out, Irwin is not the only one on Wall Street who is worried about Tesla’s margins. Needham analyst Rajvindra Gill has already pointed out that Tesla will have to sacrifice margins to achieve its 2019 delivery target. Barron’s cited him as saying:
“To meet these aggressive targets, we anticipate further price cuts and aggressive leasing plans. Furthermore, we expect gross and net profit margins to remain ongoing issues for the auto maker. We believe the auto maker will continue to take steps to boost its deliveries at the expense of its bottom line.”
It is not surprising to see these analysts turning against Tesla just before the company is about to release earnings.