Tesla shares lower as sales slowdown

Tesla registrations nearly halved in California in Q4

Tesla’s (TSLA) overall vehicle registrations nearly halved in California during the fourth quarter, according to a Dominion Cross-Sell report, which collates data from state motor vehicle records, Reuters reports.

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Tesla shares lower as sales slow down, Stockwinners

The report showed registrations in California plunged 46.5% to 13,584 in the quarter ended December 2019, from 25,402 in the same period a year earlier.

Model 3 registrations, which accounted for about three-fourth of the total, halved to 10,694.

Tesla Model 3 named Popular Mechanics' Car of the Year
Tesla Model 3 named Car of the Year, Stockwinners

The massive drop comes as tax credit for Tesla buyers ended in 2019. It had fallen to $3,750 at the start of the year and had halved to $1,875 in July.

An existing $7,500 U.S. tax credit for electric vehicles (EVs), which allows taxpayers to deduct a part of the cost of buying an electric car, phases out over 15 months once an automaker hits 200,000 cumulative EV sales, which Tesla hit in July 2018.

Morgan Stanley

Morgan Stanley analyst Adam Jonas downgraded Tesla to Underweight from Equal Weight with a price target of $360, up from $250.

The analyst sees an unfavorable risk/reward at current valuation levels following the stock’s recent rally.

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Tesla is expected to rollout is big rig soon, Stockwinners

Further, he believes risks to Tesla’s long-term Chinese business may not be fully appreciated by the market.

Four factors have driven Tesla’s share price up 105% over the last four months, namely stronger than expected global demand for its vehicles, China announcements that show the company’s expansion into the world’s largest electric vehicle market, supportive incentive developments and positive sentiment around its product expansion, Jonas tells investors in a research note.

The analyst, while admitting near-term momentum and sentiment around the stock is very strong, questions the “sustainability of the momentum.” Jonas increased his expectations for Tesla’s core auto business while decreasing his expectations for the mobility business, resulting in the price target raise to $360.

TSLA is down 2.75% to $504.

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SmileDirectClub shares tumble on new California law

SmileDirectClub says nothing in AB1519 requires ceasing or modify operations

SmileDirectClub (SDC) issued a statement on California Assembly Bill 1519, stating in part:

“We are pleased with the Governor’s signing statement for AB1519.

New California law sends shares lower, Stockwinners

While the authorizing nature of AB1519 made it difficult to veto the bill, the Governor clearly indicated that he expects all stakeholders to come to together to find a better way to create policy around teledentistry.

While this bill does not preclude SmileDirectClub’s continued operations in California, it will create unnecessary hurdles and costs to Californians that need care but struggle to afford it. The undebated, clinically unsupported, and ill-advised policy changes that are included in this bill – a bill that was intended to reauthorize the Dental Board of California until last-minute policy additions were added – have created arbitrary barriers to technological innovation…Simply put, this bill represents the dental lobby’s thinly-veiled attempt to protect traditional dentistry at the expense of Californians, and Governor Newsom made the correct choice in issuing his strongly-worded rebuke of the tactics and policy that this bill represents.

California law may require a dentist at every SDC shop, Stockwinners

Nothing in AB1519 requires SmileDirectClub to cease or modify its operations, and nothing regarding teledentistry in this legislation can take effect until the Board has given all stakeholders the opportunity to submit public comment and debate the merits of any proposed rules with clinically-based data – as the Governor has requested in his signing statement. To that effect, SmileDirectClub will be reaching out to our partners in the field to coordinate efforts so that a positive outcome for the industry – and for the California consumers – can be reached…To be clear, SmileDirectClub will continue to legally operate in California, we will be an active participant in the administration-directed public debates surrounding teledentistry, and we will continue to provide affordable orthodontic care to thousands of smiling Californians.

Moving forward, SmileDirectClub welcomes transparent policy debates that include all stakeholders.”

Heavy lobbying by both sides made AB-1519 national news, Stockwinners

UBS Comments

UBS analyst Kevin Caliendo noted that California Governor Gavin Newsom signed bill AB-1519 over the weekend and the law is expected to go into effect on January 1, 2020.

He thinks that SmileDirectClub may need to place dentists inside its shops due to the new law, though it is less clear if the bill will mean that patients will need to get x-rays as well as iTero scans, which may eventually be determined in court.

The analyst, who noted that SmileDirect is scheduled to report Q3 results on November 12, noted that he has received questions on if the company might pre-announce, but he has “no insight or precedent into whether the company will opt to do that or not.” Caliendo has a Buy rating and $24 price target on SmileDirectClub shares.

SDC shares are down 9% to $10.12 in Monday’s trading.

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