Electric vehicle leader Tesla Inc TSLA reported second-quarter financial results after market close Wednesday. FIve analysts broke down the quarterly results, what a large sale of Bitcoin BTC/USD could mean and what’s ahead for Tesla.
The Tesla Analysts: Morgan Stanley analyst Adam Jonas had an Overweight rating and a price target of $1,150.
RBC Capital Markets analyst Joseph Spak had an Outperform rating and a price target of $1,100.
Wells Fargo analyst Colin Langan had an Equal Weight rating and lowered the price target from $830 to $820.
Needham analyst Rajvindra Gill had an Underperform rating and no price target.
Wedbush analyst Daniel Ives had an Outperform rating and a price target of $1,000.
The Analyst Takeaways: Morgan Stanley's Jonas said the second quarter earnings report was stronger than expected and said Tesla remains in the pole position.
“Hard to see what really rocks the boat on consensus on Tesla until the company posts a more significant margin miss,” Jonas said.
The analyst points to the most important factors for the stock moving forward being the re-opening of factories in China, ramp-up from the Austin and Berlin gigafactories and margins.
RBC Capital Market's Spak said the second quarter report from Tesla might be the company getting its "tough quarter out of the way.”
“We see little to change anyone’s views, but continue to like the name and see margin upside potential from China recovery and Austin/Berlin ramp, both of which could be near-term catalysts for the stock,” Spak said.
The second quarter saw continued strong demand for Tesla vehicles, according to Wells Fargo's Langan, who cited long lead times on orders pointed out by the company.
“So even if there is a bit of weakness, Tesla has plenty to work through and the economy/sentiment could be in a different place in a few quarters,” Langan said.
The analyst said the company’s production is its limiting factor.
“Elon indicated a 40k/week rate is possible by year-end, so even if no further improvements, that supports consensus expectations of around 2 million deliveries next year.”
The second quarter was the first decline in gross profit on a quarter-over-quarter basis since the first quarter of 2020 according to Needham's Gill. Higher production could help improve margins going forward.
“Recent sales at higher prices should continue to flow through in 2H 22 and in ’23,” Gill said.
The analyst saw competition coming, which could be a key focus in coming quarters in discussions of market share for electric vehicles.
Ives called the second quarter better than many feared.
“Customer demand is holding up well despite the macro as Tesla does not have a demand problem per the conference call, which is in line with our thesis,” Wedbush's Ives said.
China factory shutdowns in April and May likely impacted a loss of 70,000 deliveries according to an estimate from the analyst.
Ives said many are skeptical of the second-half forecast.
“The elephant in the room for the stock will be the Everest-like uphill climb for deliveries in 2H needed.”
Analysts on Bitcoin Sale: One of the bigger storylines for Tesla’s second-quarter report was the announcement that 75% of its Bitcoin BTC/USD stake had been converted to fiat.
Langan said the move was done due to concerns over COVID-19 lockdowns and to maximize cash.
“We believe most investors would prefer TSLA rid their balance sheet of crypto, but Elon mentioned they were open to increasing Bitcoin in the future,” Langan said.
Ives highlighted the Bitcoin sale as a positive for Tesla and investors.
“Tesla sold roughly 75% of its position which ripped the band-aid off this brutal chapter that resulted in a significant loss since the Bitcoin adventure began and at times caused an overhand on the stock,” Ives said.
Ives called the Bitcoin purchase a “brutal side show chapter” that resulted in sizable losses.
TSLA Price Action: Tesla closed Thursday up 9.78% to $815.12.
Photo: Courtesy Tesla Inc.
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