advertisement

Analyst downgrades Tesla and says orders for its home battery are 'misleading' (TSLA)

<img style="float:right;" src="http://static6.businessinsider.com/image/55435c58eab8ea787801cedf-3555-2666/tesla-energy-battery.jpg" alt="tesla energy battery" data-mce-source="REUTERS/Patrick T. Fallon" data-mce-caption="Attendees take pictures of the new Tesla Energy Powerwall Home Battery during an event at Tesla Motors in Hawthorne, California April 30, 2015. Tesla Motors Inc unveiled Tesla Energy - a suite of batteries for homes, businesses and utilities - a highly-anticipated plan to expand its business beyond electric vehicles. " />

UBS says the numbers on Tesla's home batteries are "misleading."

In a note Tuesday, UBS analyst Colin Langan downgraded Tesla to "Sell" from "Neutral" and cut the firm's 12-month price target to $210 from $220.

In May, Bloomberg estimated that Tesla took orders worth about $800 million on its energy-backup units.

Langan wrote that this number was overstated (emphasis added):

<p style="padding-left: 60px;">TSLA received over $800m in "orders" (~3 [gigawatt hours], ~0.75 [gigawatts]) in the first 5 days of announcing the powerwall/Powerpack; however, this pace is misleading as customers did not put down deposits, so these are just solicitations of interest. More importantly, early adopters ("green" consumers) likely are driving up initial orders, but once these orders are filled, making the mass market leap will likely be difficult given the challenging economics.

Because orders don't necessarily translate into final sales, Langan said Tesla's planned storage capacity of 15 gigawatts by 2020 may end up being higher than demand.

Langan noted that Tesla's stock had surged 40% since investors anticipated the announcement of the home batteries. He estimates market demand of 3.2GW by 2020, less than the consensus of 7.2GW. If the broader estimate is correct, Tesla would need 75% of market share, Langan said.

And meanwhile, there's still plenty of room for new competitors to eat into Tesla's market share.

Langan also expects that Tesla's spending on research and development for the new Model 3 and stationary storage will continue to grow, and he lowered estimates for 2015 earnings per share to $0.20 from $1.00.

Tesla shares fell as much as 4% in premarket trading. Shares are up 27% year-to-date and 28% over the past 12 months.

Tesla closed up 3% at $282.26 on Monday.

<b>See Also:</b>

<ul><li>What happens when you eat Chipotle for 153 days straight</li><li>THE DRONES REPORT: Market forecasts, regulatory barriers, top vendors, and leading commercial applications</li><li>7 secret menu items you should order from McDonald's</li></ul>

SEE ALSO: This is the big thing about Tesla that people don't understand