What You Missed This Week in EVs and Clean Energy

Wells Fargo downgrades Tesla to sell on price, demand, and valuation concerns

Institutional investors and professional traders rely on The Fly to keep up-to-the-second on breaking news in the electric vehicle and clean energy space, as well as which stocks in these sectors that the best analysts on Wall Street are saying to buy and sell.

From the hotly-debated high-flier Tesla (TSLA), Wall Street’s newest darling Rivian (RIVN), traditional-stalwarts turned EV-upstarts GM (GM) and Ford (F) to the numerous SPAC-deal makers that have come public in this red-hot space, The Fly has you covered with “Charged,” a weekly recap of the top stories and expert calls in the sector.

TESLA: 

On March 13, Wells Fargo downgraded Tesla. Wells expects the company’s volume to disappoint as price cuts are having a diminishing impact on demand. Lower deliveries and prices drive the firm’s 2024 earnings estimate to 32% below consensus. Tesla’s price-to-earnings premium valuation versus the “Magnificent 7” is likely at risk, the firm tells investors in a research note. Wells says headwinds from disappointing deliveries and more price cuts from Tesla will likely drive negative earnings revisions. It believes Model 2 economics “are likely tough” as a mass market compact vehicle. Tesla already trades at 58-times consensus 2024 earnings and 89-times Wells’ estimate, a premium to its Magnificent 7 peers trading at 31-times, contends the firm.

PRICE RAISE: 

Tesla said on Saturday it would increase the price for its Model Y electric vehicles in a number of European countries on March 22 by approximately EUR 2,000 or the equivalent in local currencies, Reuters reports. The move followed the automaker’s announcement on Friday that it would increase prices for all Model Y cars in the U.S. by $1,000 on April 1.

Commenting on the news, Deutsche Bank said that in light of “persistently high” Model Y inventory, Deutsche Bank views Tesla’s preview of future price increases as an attempt to boost sales this month, rather than a sign of solid demand.

Meanwhile, Evercore ISI argued that the moves are likely a marketing push to sell production and inventory into quarter-end as Q1 deliveries appear weak. The firm estimates Q1 EPS has risk to about 50c. Evercore, which thinks it “may also be logical to ponder whether constant price changes (primarily communicated over X) is confusing or even negative for brand sentiment,” has an In Line rating on Tesla shares.

TARGET CUT: 

Goldman Sachs lowered the firm’s price target on Tesla, while keeping a Neutral rating on the shares. The firm reduced estimates to better reflect what it believes are both production and market headwinds for Tesla. Delivery estimate data suggests the company’s Q1 volumes are tracking lower than Goldman’s prior 475,000 estimate, Goldman tells investors in a research note. The firm now models Q1 volumes at 435,000 and 2024 vehicle deliveries at 1.98M compared to 475,000 and 2.08M previously. While monthly data is preliminary, other data points also suggest slower sales for Tesla, adds Goldman. The firm says downloads of the Tesla app in the U.S. and in Europe have declined sequentially.

Back on Wednesday, UBS had also lowered the firm’s price target on Tesla, maintaining a Neutral rating on the shares after lowering the firm’s Q1 delivery forecast to 432,000 from 466,000. The firm notes its view is now about 10% below the 477,000 unit consensus forecast. UBS’s 2024 delivery forecast is now 1.96M units, down from 2.02M previously and about 5% below consensus.

Click here to check out Tesla’s recent Media Buzz Sentiment as measured by TipRanks.

RAISING CAPITAL, FINDING PARTNER: 

Fisker’s shares outperformed late last week after the company said in a statement that, “As a matter of company policy, Fisker does not comment on market rumors and speculation. However, Fisker often works with outside advisors to help manage its business and assist in developing and executing strategies. Fisker is focused on raising additional capital and engaging in a strategic partnership with a large automaker. The company is also continuing to pursue its shift to a Dealer Partnership model in both North America and Europe. The leadership team is laser-focused on these efforts.”

This came after the Wall Street Journal reported that Fisker has hired restructuring advisors FTI Consulting and the law firm Davis Polk to help with a potential bankruptcy filing for the company.

RIVIAN: 

Piper Sandler upgraded Rivian Automotive. After watching the previous week’s live stream, re-assessing the capex outlook, and considering the post-Q4 selloff, the firm says it feels “compelled to upgrade” the stock, but adds that, “Make no mistake: buying RIVN is risky and a botched midyear re-tooling effort could yet surprise investors negatively.” However, the newly unveiled R2 SUV generated 68,000 orders in less than 24 hours and the firm thinks its sibling R3 “could be one of the most compelling designs on the market when it is released.” Excitement around new products, coupled with a plan to delay capex and build R2 in an existing plant, should prompt investors to “adopt a more bullish stance,” Piper argues.

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Originally Posted March 18, 2024 – What You Missed This Week in EVs and Clean Energy