Shares of Tesla (TSLA) had a down day following a media report saying the company sent a team to probe an apparent explosion of one of its vehicles in Shanghai on Sunday. Additionally, Evercore ISI analyst Arndt Ellinghorst downgraded the stock to Underperform, citing his more cautious view on demand for its vehicles, in particular the recent "severe decline" in demand for the Model S and Model X. Meanwhile, the company unveiled its chip for fully self-driving cars at its Autonomy Day event.
VEHICLE FIRE INCIDENT REPORT: Tesla has sent a team to investigate the apparent explosion of one of its vehicles in Shanghai and is cooperating with relevant departments about the matter, CNBC's Evelyn Cheng reported, citing company Weibo posts. It was not clear which Tesla model was impacted but the car was reportedly parked at the time of the fire and there are no known casualties at this time, the report stated.
SELL TESLA: In a research note to investors on Monday, Evercore ISI's Ellinghorst downgraded Tesla to Underperform from In Line, citing his more cautious view on demand for its vehicles, in particular the recent "severe decline" in demand for the Model S and Model X. While the analyst acknowledged he remains encouraged by Tesla's vision and future growth prospects, he noted that there is increased uncertainty around near-term demand versus previous bullish forecasts and growth cannot stall for a growth company. Given the demand concerns, Ellinghorst cut his delivery forecasts for 2019, 2020 and 2021 and lowered his 2020 earnings per share estimates by 40%. The analyst said his demand and liquidity concerns include Model S and Model X demand given increasing levels of competition/cannibalization; financing growth with repeated "cost-cutting measures" designed to conserve cash when an equity raise would alleviate liquidity concerns; sustainability of Model 3 demand in EU and China; and gross margin/mix headwinds as Model S and Model X volumes come in "materially lower." Ellinghorst lowered his price target on Tesla shares to $240 from $330.
TESLA UNVEILS FSD TECH: During Tesla's Autonomy Day event, the carmaker presented its full self-driving tech and provided a look at its self-driving computer, with system architect for Full Self Driving Pete Bannon giving an in-depth presentation of "Hardware 3" and Tesla's custom solutions. Bannon noted that Tesla started shipping the new self-driving computer with Model S and Model X earlier this year and in April for Model 3. The goal was to be able to retrofit existing cars, at lower costs, the executive said. Overall, it took three years from start of FSD group to deployment of HW3 in all three Tesla cars. CEO Elon Musk highlighted that all Tesla cars being produced have the technology necessary for full self-driving. Additionally, the chief executive pointed out the importance of the redundancy built into the FSD computer. "The general principal of this is that any part of this could fail and the car keeps driving," Musk said. Meanwhile, Bannon told the audience that the size of CPU is in a "sweet spot" between cellphone CPU size and high-end CPU size, and confirmed that the neural processor design is custom by Tesla, not external intellectual property. Fabricating is being done by Samsung (SSNLF) in Austin, Texas, the company said. Comparing to Nvidia (NVDA), Bannon said that one can do neural networks that are 7-times more powerful on Tesla's chip versus Nvidia's. Elon Musk added that Nvidia is a "great company," but has many customers and therefore has to do a more general solution. On the other hand, Tesla was able do a more specific solution, Musk stated.
'TRAIN WRECK' QUARTER: While Wedbush analyst Daniel Ives told investors on Monday morning that he expected positive announcements from Tesla's Autonomy event, he pointed out that the company’s first quarter results are "clearly the elephant in the room," as delivery numbers released and cost trajectory point to a "train wreck quarter." The analyst noted that he "firmly" believes in the long-term vision for Tesla and expects self-driving autonomous technology will be a linchpin of the company's success, but argued that the Street needs to have a better grasp on the near-term demand trajectory in the U.S. for the second quarter, delivery logistics for Model 3 in Europe/China, and better understanding of the tenuous balance sheet situation going forward for the stock to stabilize. Ives reiterated an Outperform rating and a $365 price target on the stock.
PRICE ACTION: At the close, with its Autonomy Day event still ongoing, shares of Tesla have dropped 4% to $262.75.
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