Tesla Inc.'s TSLA third-quarter earnings report could not give its sagging stock a lift but its forward outlook evinces confidence, according to Loup Funds’ Gene Munster.
What Happened: As opposed to expectations of a small increase in average selling price, Tesla reported a 4% sequential drop, Munster said, attributing the decline to stronger-than-expected cheaper China sales.
Automotive gross margin came in at 26.8% compared to the consensus of 27.5% but exceeded the third quarter’s 26.2%, he noted. This, according to the Tesla bull, was due to a higher mix of lower ASP China sales and higher input costs.
“I view the misses on revenue, deliveries and gross margin as fractional, and understandable, given the broader supply environment,” Munster said,
None of Tesla’s rivals has gained traction like the company in the past three months and none has advanced autonomy at the pace Tesla did, he added. Among the competition, Munster had a word of praise for Rivian Automotive Inc. RIVN, which, the analyst thinks, is better positioned and has the capability to be a long-term winner along with Tesla.
Future Perfect: The market for electric vehicles is “massive,” Munster said, adding that EV penetration will likely grow to 100% in the next 20 years from 5% now. Traditional carmakers are still grappling with retrofitting EV production atop legacy gas vehicle production, the Loup Funds co-founder said.
“Tesla still offers the best value in an EV and no other car maker has optionality around storage, solar and robotics,” he added.
The September quarter, according to the analyst, will prove to be just a “bump in the road” for Tesla, similar to the situation that prevailed in 2018 when the company struggled in ramping up Model 3 production. Although a vertical lift in Tesla shares, reminiscent of 2020, is unlikely, valuation will increase in the coming years as it maintains leadership, he added.
“December and March sales, along with auto gross margin results, will reassure investors that Tesla is on track toward its long-term goals,” Munster said.
Price Action: Tesla shares closed Wednesday's session 0.84% higher at $222.04 but fell 6.28% to $208.10, according to Benzinga Pro data.
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