To The Moon

Why Has Tesla Risen So Much Lately?

1)Deliveries and Energy Storage Beat Expectations:

Tesla's $Tesla Motors(TSLA)$ Q2 deliveries and energy storage deployment exceeded expectations.

2)Happier Elon Musk:

Despite a judge ruling against it, Elon Musk won Tesla shareholder approval for a $56 billion pay package. Tesla will urge Chancellor Kathaleen McCormick to reconsider her verdict in a hearing set for July 8, with a decision expected in a few weeks later. The hearing will not factor in the shareholder vote supporting the 2018 pay package.

3)Robotaxi Unveil:

On August 8, Elon Musk is expected to announce how Tesla owners can make money off their cars. Investors are excited that Robotaxi roadmap will be unveiled soon.

Deliveries Analysis

• On April 2, Tesla reported Q1 2024 deliveries of 386,810, missing FactSet estimates of 457,000 by 15%.

• On July 3, Tesla reported Q2 2024 deliveries of 443,956, surpassing FactSet estimates of 439,000 by 1%.

• Q1 2024 deliveries grew 14.77% quarter-over-quarter but declined 4.76% year-over-year.

• Since the delivery announcement, Tesla stock has risen 17.41%.

• Elon Musk previously stated in January and April that he expects deliveries to increase in 2024 compared to the previous year.

• Total deliveries in 2023 were 1,808,581 compared to 830,766 in the first half of 2024.

• To meet the delivery growth target for 2024, Tesla needs to sell more than 977,815 cars in the second half of 2024.

• In the second half of 2023, total deliveries were 925,477. This means Tesla needs to sell 5.66% more cars in the second half of 2024 to meet Musk’s promise.

• It is likely that 2024 deliveries may see a slight dip as buyers might delay purchases, anticipating lower-cost new models next year, leading to a potential shortfall in meeting delivery promises.

Upside Surprise from Energy Volumes

• Tesla reported deploying 9.4 GWh of energy storage products in Q2, marking its highest quarterly deployment to date.

• The year-over-year growth for Q2 2024 was 157.32%, and quarter-over-quarter growth was 131.93%.

• The Energy Generation and Storage segment accounted for 7.68% of total revenue in Q1 2024.

• This segment is Tesla’s highest-margin business with a gross profit margin of 24.65%.

• Best Case Scenario: The gross profit for this segment was $403 million in Q1 2024. In the best case, this could increase to $934 million ($403 million x 132%) in Q2 2024. This could raise the overall gross profit margin from 17.35% in Q1 2024 to 19.84% in Q2 2024, assuming all other factors remain constant.

Conclusion:

• I am long-term constructive on Tesla.

• Despite the recent surge, I remain skeptical that Tesla's rally will persist. Technical analysis indicates the next significant resistance level is at $265.

• However, we have learned from history not to bet against Tesla and Elon Musk, as Tesla has many long-term secular growth catalysts that could boost the share price.

• Bloomberg consensus shows a 12-month target price of $196.08 for Tesla, indicating a potential downside of 20.4% from the last closing price of $246.39.

• You may find my previous articles on Tesla here, here , here and here.

I will also be conducting an in-person 2H2024 US Market Outlook seminar on July 11th at 7:00 PM.

Seminar Registration Link:

https://www.itiger.com/sg/marketing/USMOS