Tesla: Onward And Upward

Oct. 02, 2023 1:40 PM ET Tesla, Inc. (TSLA)

Summary

• Tesla vehicle deliveries declined sequentially due to down-time at production facilities.
• With a Cybertruck back order of 2 million, the pick-up truck battle is Tesla’s to lose.
• Additional leg of strong growth ahead, as focus on battery storage business ratchets.
• We reiterate our $492/share Price Target and Buy Rating on Tesla.

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The article discusses Tesla, Inc.’s recent performance and outlook. Here are the key points:

1. Production and Deliveries: During Q3 2023, Tesla produced 430,488 vehicles and delivered 435,059. This represents a sequential decline, but it was expected due to planned downtime at production facilities. Despite this decline, the number of electric vehicles delivered during the quarter exceeded production figures, indicating strong customer demand.
2. Financial Expectations: Analysts anticipate Tesla’s Q3 2023 revenues to be around $24.7 billion with a GAAP earnings per share of $0.65. The article suggests that actual results may fall below consensus estimates due to the sequential delivery decline in the automobile business. However, increased sales in the energy storage segment may offset some of the impact.
3. Margins: Despite softer revenues, Tesla is expected to have higher gross margins on a sequential basis. This is attributed to factors like increased Model Y pricing, lower commodity prices, improved automation, and depreciation. However, profit margins may be impacted by expenses related to the production ramp-up of the Cybertruck, Megapack, and investments in artificial intelligence.
4. Outlook: The article maintains a positive outlook for Tesla, reiterating a Price Target of $492/share. This target is based on a 10-year Discounted Cash Flow model, incorporating factors like revenue growth, profit margin, operating cash flow, and cost of capital. The article emphasizes the potential for strong growth in Tesla’s energy storage business.
5. Cybertruck: Tesla’s upcoming Cybertruck is seen as a significant development, as pick-up trucks account for a substantial portion of the U.S. automobile market. The article acknowledges competition from established players like Ford and General Motors but expects strong demand for the Cybertruck due to its unique features and capabilities.
6. UAW Strike: The ongoing UAW strike at other automakers is not expected to benefit Tesla significantly. While it may affect competitors’ profit margins in the short term, the strike is likely to accelerate the trend toward automation in the industry.
7. Battery Storage Focus: Tesla’s focus on battery storage systems aligns with government initiatives to promote green energy technologies. Tax incentives and subsidies for Tesla’s energy storage products, such as Powerwall and Megapack, are expected to drive sales. Tesla’s global presence in the energy storage business is expanding, with projects in various countries.

In conclusion, the article suggests that Tesla remains well-positioned for growth, with a positive long-term outlook. It emphasizes the importance of investing in Tesla for the long haul, rather than short-term trading, due to the company’s high growth potential and products in growing markets. The Cybertruck and the energy storage business are highlighted as key drivers of future success.

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Tesla Stock: Onward And Upward (NASDAQ:TSLA)