Tesla stock falls after Bernstein issues cautious note on services margins, automotive gross margins

Shares of Tesla Inc. TSLA, -3.99% are down 3.2% in Friday trading after Bernstein analyst Toni Sacconaghi highlighted a sharp drop in the company’s services gross margins and asked about what this plunge meant for the company’s automotive margins.

“The key driver of the margin erosion appears to be ‘Services and Maintenance,'” Sacconaghi wrote, but he and his team “struggle to find evidence as to why the COGS [cost of goods sold] of Services and Maintenance have increased exponentially…with no commensurate increase in revenues.”

He said that Tesla’s assertion is that the company is building out services infrastructure, but that doesn’t square with Bernstein’s figures.

“The worry/key question, of course, is whether COGS that should be (or historically have been) booked in the Automotive Segment are now being booked in the “Services and Other” reporting segment, given that investors focus nearly exclusively on Automotive GMs & generally disregard “Services and Other” GMs,” Sacconaghi wrote.

He has a market perform rating on Tesla’s stock and a $265 price target. Tesla shares are down 12% over the past 12 months, while the S&P 500 SPX, +0.19% has gained 13%.