: Tesla has ‘neutral-to-slightly negative’ earnings setup — but Citi says GM’s is more compelling

Tesla Inc. TSLA has a “neutral-to-slightly negative” setup heading into its upcoming earnings report, according to a Citi Research analyst who sees General Motors Co.’s GM earnings prospects as more compelling. Tesla’s July 19 earnings report will arrive as Tesla shares have more than doubled on the year, and Citi’s Itay Michaeli said that bears worry that Tesla’s “stretched valuation” will make the stock “vulnerable going into a quarter that will again be impacted by price cuts, with any margin shortfall or even just unimpressive numbers possibly dampening sentiment.” Conversely, he notes consensus expectations for the year don’t seem particularly aggressive, while “the Q2 delivery beat leaves room for an upward guidance revision.” In sum, Michaeli sees the second-quarter earnings setup “as a neutral-to-slightly negative mainly on valuation, but in the absence of imminent downward estimate revisions we don’t see a de-rating catalyst either.” He boosted his price target on Tesla shares to $278 from $215 but kept a neutral rating on them. Michaeli is more positive on GM, opening a 30-day upside catalyst watch on that stock. “Consensus estimates have risen, but we continue to see ample upside from strong [North America] pricing,” he wrote, while lifting his GM target price to $89 from $85 and sticking with his buy stance.

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