Next Tuesday (23rd Eastern Time), Tesla, which has recently been hit hard, will release its latest performance report and hold what may be the most widely anticipated conference call in history. However, internationally renowned investment bank Barclays predicts that there will be no good news for this meeting.
In its latest report released on Wednesday, Barclays lowered Tesla's target stock price by 20% from $225 to $180 and maintained its "neutral" rating. The bank believes that Tesla's upcoming first quarter financial report will become a negative catalyst for the stock.
On Wednesday, Tesla closed at $155.45, down 1.06%. So far this year, the cumulative decline of the stock has reached 38%,
Just two weeks before Barclays made the above prediction, Tesla released Q1 delivery data, which greatly disappointed Wall Street. Tesla attributed it to supply delays, including a fire at the Berlin factory and a decrease in production of the new Model 3 at the Fremont factory, but Wall Street believes that the main reason is the decrease in market demand for its products.
A week ago, media reports mentioned that Tesla had abandoned its low-cost electric vehicle production plan. Sources said the decision to abandon the Model 2 was announced at an internal company meeting held at the end of February this year, and the company will focus on developing the autonomous taxi Robotaxi.
Regarding this, Musk quickly denied the authenticity of the report and accused the media that released the news of "lying". But it has also been acknowledged on social media that Tesla will release Robotaxi on August 8th. On Monday, Tesla issued another employee letter, planning to lay off 10% of its employees globally, and two key executives will also resign.
Future strategy is the focus of performance meetings
Barclays analyst Dan Levy said he expects Tesla's performance to be lower than Wall Street's expectations next week, and its gross profit margin may disappoint investors. CEO Musk's recent decision to fully invest in an autonomous taxi fleet is unlikely to receive a warm welcome.
"The plan for Model 2 may receive the most attention, but don't expect satisfactory answers," he said.
Levy pointed out that while Tesla's focus should be on its ability to increase car delivery and profit margins in the increasingly competitive electric vehicle market, this may not be the focus of the earnings conference call.
"Tesla's fundamentals have been severely challenged in the near future, but these issues will give way to larger ones as Tesla is facing a turning point in its investment strategy. Specifically, the central focus of this conference call will be to understand Tesla's future strategy, as Tesla seems to be abandoning plans to produce the massmarket model (Model 2) and instead focusing on autonomous driving.".
Levy said that if Tesla really shifts from mass market cars to fully autonomous robot taxis, it will "have a significant negative impact on Tesla's investment strategy.". He said, "This brings enormous uncertainty to Tesla's future path."
Three major negative factors
When discussing Tesla's earnings conference call next week, Levy emphasized three negative catalysts he expected to hear.
1. It is expected that the gross profit margin in the first quarter will be lower than market expectations. In addition, we do not expect Tesla to make any comments to ease investor sentiment as fundamentals remain weak in the near future.
"Free cash flow may be negative, which is the first time negative cash flow has occurred since the first quarter of 2020. There may be some shocking factors to this result."
"Although investors may attend conference calls with significant questions about Tesla's strategy, we believe that many of these questions may not have answers. Due to the significant uncertainty in investment perspectives, this may lead investors to choose to give up and leave."