Launching coverage of the U.S. Autos sector, Credit Suisse analyst Dan Levy initiated Tesla (TSLA) with an Underperform, a sell-equivalent rating, saying the company faces "risks ahead" and is "likely to settle as a niche automaker." Among others, the analyst also started coverage of Ford (F) and General Motors (GM) with Outperform ratings.
'NICHE AUTOMAKER': In a research note to investors, Credit Suisse's Levy initiated coverage of Tesla with an Underperform rating and $189 price target. The analyst believes that while Tesla currently leads in areas that will likely define the future of car making, the company faces "risks ahead" and is "likely to settle as a niche automaker." Volkswagen's (VWAGY) "strong push" on electric vehicles highlights the competition Tesla faces from larger, better capitalized players, he contended, adding that Tesla lacks the same scale as other automakers and has struggled with the basic "processes" of the auto industry. Ultimately, if Tesla cannot maintain "healthy" margins, then its edge in the differentiating aspects of the auto business will be a "moot point," Levy said.
Additionally, Credit Suisse's Levy started coverage of Aptiv (APTV), Dana (DAN), American Axle (AXLE), BorgWarner (BWA), Ford, and General Motors with Outperform ratings, while initiating Veoneer (VNE), Magna (MGA), Adient (ADNT), Lear (LEA), and Delphi Technologies (DLPH) at Neutral.
ONGOING LOSSES SEEN BY BARCLAYS: Meanwhile, Barclays analyst Brian Johnson raised his second quarter delivery forecast for Tesla to 85,000 from 75,000 to reflect the quarter-end push hinted at in leaked Elon Musk emails as well as a likely subsidy-fueled boost in Canada. While the analyst recognizes the "swing trade" in Tesla shares returned, he expects the stock now reflects a delivery beat. Despite the expected second quarter higher deliveries, Johnson still predicts Tesla will post "ongoing losses," with Models S/X likely still stalled, and with a lower mix in the U.S. and Canada as SR+ demand is fulfilled, and continued service losses. He reiterated an Underweight rating and a $150 price target on Tesla's shares.
PRICE ACTION: In late morning trading, shares of Tesla have gained about 1% to $220.87.