Tesla shares have skyrocketed by about 120% since the electric car maker last delivered an earnings report in October. Skeptics are cautioning investors about the effects of the coronavirus on Tesla's China operations, and declining sales volumes in mature markets for the company.
The rally continued last week as CEO Elon Musk drew accolades from President Donald Trump. He called Musk "one of our great geniuses" in an interview with CNBC's Joe Kernen,Trump on Elon Musk: I was worried about him, because he's one of our great geniusesThe recent rally does not guarantee the road ahead will be easy for Tesla, however. Skeptics point to unit sales declines in mature markets and margin pressure, among other risks.
Of specific concern for Brawn was the company's use of finance lease arrangements. These "effectively overstate free cash flow, but very few do the required analysis to figure this out," he said. Tesla has touted its prospects in China, but the costs of operating its new factory there could begin to hit the company's bottom line in the first quarter of 2020, Brawn added.
One factor putting pressure on Tesla's margins? Most of the vehicles it delivered in the fourth-quarter were Model 3s, and not its higher-priced Model S and Model X electric vehicles, and a good portion were exported from the U.S. to Europe and China.
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