Tesla Shares Soar to 11-Year High, Yet Some Analysts Bearish
On Thursday, $Tesla Motors(TSLA)$ 's stock soared nearly 22%, marking its best single-day performance since 2013. Elon Musk’s net worth jumped by $33.5 billion in a single day, further solidifying his lead on Bloomberg's billionaire index.
Q3 Results: Earnings Beat, Revenue Miss
On Wednesday, Tesla reported revenue of $25.18 billion, falling slightly short of analysts' $25.37 billion expectations, but up 8% year-over-year. Adjusted earnings per share (EPS) hit $0.72, beating the expected $0.58 by a wide margin.
Boosting profits this quarter was $739 million in revenue from regulatory credits, a major factor in Tesla's margin lift. JPMorgan analysts warned, however, that this credit-based boost might be “unsustainable.” Automakers are required to hold a certain number of regulatory credits; if they fall short, they can buy credits from other companies. Tesla, as an electric car producer, accumulates these credits and sells them for profit.
Tesla’s Full Self-Driving (FSD) feature was another major revenue contributor, adding $326 million this quarter. CFO Vaibhav Taneja mentioned during the earnings call that the launch of the Cybertruck and the addition of the “Actually Smart Summon” feature would further boost FSD sales.
Analysts Remain Cautious
Musk predicted that Tesla's vehicle sales could grow by 20% to 30% next year, driven by low-cost models and advancements in autonomous driving. According to a FactSet survey, analysts expect a delivery growth rate of around 15% by 2025.
Deutsche Bank analysts expressed doubt over Musk’s bold predictions. In their report, they maintained a conservative growth forecast of 10% to 15%, assuming Tesla can release a Model Y variant under $30,000 post-subsidy, along with other compact SUV options.
Meanwhile, Morgan Stanley projected a more moderate growth of 14% by 2025. They emphasized that success hinges on Tesla’s ability to introduce affordable models, financing options, and improved features to increase accessibility.
Bernstein Skeptical: Sets $120 Price Target
Not all analysts are on board with Musk’s optimism. Bernstein analysts, maintaining a $120 price target, described the earnings call as "more of a morale-boosting rally" with Musk’s predictions once again dividing bulls and bears. They noted that Tesla only responded to two sell-side analyst questions.
Musk has long promised software upgrades that would transform Teslas into robotaxis, yet those promises remain unfulfilled. Since 2017, he’s also promised an updated Tesla Roadster, but the design is still incomplete.
Bernstein analysts wrote, “We still find it hard to see Tesla overcoming technical and regulatory hurdles to outpace existing Level 4 robotaxis. Fully unsupervised self-driving is likely years away.” They also highlighted Musk's history of over-optimism about FSD, noting that data suggests Tesla lags behind competitors in the autonomous taxi market.
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