Barclays downgraded Polestar Automotive (NASDAQ:PSNY) to an Underweight rating (From Equal Weight) and cut the 12-month price target on the stock to $3.00 (From $5.00) following demand and capital concerns.
PSNY reported disappointing 2Q results. Although the bottom-line EPS fell slightly short of consensus expectations (-14 cents versus -13 cents), PSNY maintained its 2023 volume and gross margin percentage guidance.
“The largest incremental development since our launch of coverage has been a deterioration of EV demand,” Barclays analysts wrote.
They acknowledge PSNY's reliance on contract manufacturing as a strategic move to sidestep direct price competition by eliminating overhead cost worries, however, the uncertain demand landscape raises concerns about PSNY's eventual production levels.
Despite PSNY's stated potential to achieve volumes in the 300K range, the analysts anticipate a need for tangible results with their upcoming model launches. Additionally, given PSNY's affiliation with the wider Geely (OTC:GELYY) conglomerate (with 90% of its equity owned by Volvo (OTC:VLVLY) and Geely), the company faces an additional challenge in terms of market positioning, with the aim of avoiding direct competition with Volvo).
Earlier this year, PSNY revised down its 2023 volume projection, scaling it back to a range of 60,000 to 70,000 units from the previously set 80,000. What's even more worrisome is the growing trend of selling vehicles to the fleet sector.
While some of these sales may involve company cars in Europe, which is a relatively more robust channel, Barclays suspects a substantial portion has been directed towards the car rental segment, where economic conditions are generally less favorable.
Shares of PSNY are down 2.3% in premarket trading on Thursday.