Al Root
Tesla stock is rising after the electric-vehicle manufacturer beat analysts' quarterly estimates again. But the company's second quarter wasn't strong enough to change many minds.
Higher production and stable demand in the second half of 2022 might help do that.
Tesla (ticker: TSLA) reported on Wednesday second-quarter adjusted earnings per share of $2.27. The Wall Street consensus was closer to $1.80 a share. It's the sixth consecutive earnings "beat" for the company.
Investors appeared reasonably happy. Shares are up more than 5% in early treading Thursday, at about $780.50 a share.
Cowen analyst Jeffrey Osborne wasn't quite as impressed, noting in a report Wednesday evening that Tesla reported lower operating expenses and tax rate than he was expecting. Osborne would have preferred better gross margins.
What's more, he sees Tesla stock "rangebound" until investors have a better sense that production ramps at the new Berlin and Texas plants are going well.
Berenberg analyst Adrian Yanoshik addressed the production ramp in his post-earnings research report. He projects profit margin improvement in the third quarter as output at the new facilities moves higher.
Yanoshik also noted "stabilized lead times" for the Model Y. The issue of lead time has been a source of debate among investors and analysts.
Lengthening lead times, even as Tesla has raised prices roughly 25% to 30% so far in 2022, has been taken as a sign that demand for EVs, and Tesla's EVs, remains rock solid. Weakening or stabilized lead times could be a bad sign as the economy slows.
CEO Elon Musk addressed lead time on the company's conference call, noting that Tesla wants lower lead times. He also reiterated his belief that Tesla can sell all the cars it can make for the foreseeable future. Musk doesn't seem worried about demand.
RBC analyst Joseph Spak appeared to agree with Musk, writing Wednesday evening that he believes Tesla doesn't have a demand problem. Spak also was encouraged by increasing vehicle supply at Tesla's older plants.
Spak believes Tesla's plant in Fremont, Calif., can produce up to 650,000 vehicles a year, up from a prior estimate of 600,000. He sees the Shanghai facility able to produce about 750,000 units a year. Shanghai produced about 480,000 vehicles in 2021.
Both Yanoshik and Osborne rate Tesla shares at Hold. Osborne has a $733 price target on the stock. Yanoshik's price target is $833.
Spak rates shares a Buy. His price target is $1,100. Daiwa analyst Jairam Nathan also rates Tesla stock a Buy. His price target is $800. Nathan, like Spak, focused on production in his post-earnings report.
Tesla "management is hopeful of exiting 2022 at close to 40,000 units/week of total production," wrote Nathan. That's works out to roughly 2 million vehicles a year, allowing some time for retooling and vacations.
Exiting the year at the 2 million unit run-rate would put Tesla on a path to grow volumes at 50% again in 2023. Still, weekly output would need to march higher over the course of 2023. Tesla is expected to deliver about 1.4 million units in 2022 -- 50% more than that is 2.1 million units.
Overall, 53% of analysts covering Tesla rate the stock a Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 58%. The average analyst price target on Tesla is about $870 a share.
Coming into Thursday trading, Tesla stock has fallen about 30% this year, while the S&P 500 and Nasdaq Composite have fallen about 17% and 24%, respectively.
Write to Al Root at allen.root@dowjones.com
$(END)$ Dow Jones Newswires
July 21, 2022 10:16 ET (14:16 GMT)
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