Tesla (TSLA +2.40%) stock revved 4% higher through 12:55 p.m. ET Monday after Barclays Capital's Dan Levy predicted the company will beat expectations on Q3 deliveries this year.
That does sound like good news for investors -- but remember to read the fine print.
NASDAQ: TSLA
Key Data Points
What Barclays said about Tesla
In this morning's note, Levy argued that Tesla is likely to report 8% year-over-year growth in deliveries of its electric cars, which is more than other analysts are predicting, reports StreetInsider. Specifically, the Barclays analyst sees Tesla delivering 470,000 automobiles in the quarter, versus consensus projections for 461,000 units. Additionally, Levy predicts that Tesla's profit margins, which have been under pressure, will revive "modestly" in the quarter.
That's the good news.
The bad news is that Levy thinks most investors are already expecting Tesla to outperform consensus numbers, so that a positive surprise on deliveries may not move the stock as much as it might if investors were more fearful of a miss. Additionally, Levy warns that Tesla's inventories of unsold cars, which it had successfully shrunk somewhat in Q2, are on the rise again -- a trend that might not bode well for profit margins. Globally, the analyst believes Tesla has an inventory of anywhere from 120,000 to 130,000 unsold cars.
Is Tesla stock a buy?
Probably the worst news for Tesla investors today, though, is that while Barclays sounds optimistic on Tesla's deliveries, it's not optimistic at all about Tesla's stock price.
Although Levy maintained an equal weight (i.e., hold) rating on Tesla stock today, the analyst set a price target of only $220 on Tesla stock -- versus the $248 the stock now costs after today's forecast. That implies that, if Levy is right, Tesla stock could sink 11% over the next 12 months even if it does beat on deliveries.
And Levy probably is right about Tesla stock going down, for the simple reason that 67 times earnings is too high a price to pay for single-digit sales growth and declining profit margins. To me, this means Tesla stock is still a sell.
