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The Ratings Game: Tesla shows ‘solid’ sales, but COVID shutdowns may come back to haunt it, analysts say

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Wall Street analysts on Monday praised Tesla Inc.’s “solid” quarterly sales, but some warned that the worries shifted to the second quarter because the ongoing supply-chain snags are not going away.

Tesla
TSLA,
+5.61%

on Saturday reported the delivery, its proxy for sales, of a little over 310,000 vehicles in the first quarter. Chief Executive Elon Musk called it an “exceptionally difficult” quarter due to the supply-chain problems and China’s COVID policies.

Tesla and a few other auto makers report quarterly deliveries and production, rather than monthly numbers.

The deliveries were “better than feared,” in light of COVID-related shutdowns in China and “massive logistics complications” delivering cars to customers in Europe, Wedbush analyst Dan Ives said in a note Monday.

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Some 20,000 to 25,000 vehicles likely were pushed to second quarter due to the logistical and factory problems, he said.

“We remain steadfastly bullish on the Tesla story and believe when factoring in all the manufacturing headwind dynamics this was a modestly bullish print,” he said.

Emmanuel Rosner with Deutsche Bank called the delivery and production numbers “solid” especially in light of the shutdowns in China.

Tesla achieved a more than 1.24 million unit annualized production in the first quarter, which “represents a solid start to 2022, and, in our view, leaves it on track to achieve ~1.5m units in 2022 as the Berlin and Texas factories ramp throughout the year,” Rosner said.

“Beyond the quarter, we remain impressed with Tesla’s operational execution in the face of large industry supply-chain challenges, and with its pricing power which could enable it to more than offset steep raw materials pressure,” he said.

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With the two new factories coming in line “we continue to expect strong Tesla volumes this year,” the analyst said.

Jeffrey Osborne with Cowen took a slightly more cautious view, saying that the shutdowns in China are likely to “plague output” in the second quarter.

Moreover, he reminded investors that Tesla has delayed production of its commercial electric truck and its Cybertruck electric pickup truck to 2023 and there’s no under-$25,000 Tesla EV in the horizon.

Patrick Hummel at UBS said in his note that Tesla remains on solid footing in defending its position as an EV leader “because, in our view, it has the best setup for navigating the supply chain cliffs, paired with a highly standardized and rapidly scalable product range.”

Hummel raised their price target on Tesla shares to $1,100, from $1,000, based on what they called “detailed financial forecasts” through 2032 and “opportunity” from Tesla’s “robotaxis” sometime after 2030, which had not been included in the models.

UBS’s global EV consumer survey, which polled about 11,000 people in the top seven countries for EVs, shows that Tesla “continues to be seen as technology leader by wide margin,” Hummel said in the note.

Tesla also enjoys the “highest vertical integration in the most critical supply chain areas” such as semiconductors and batteries, Hummel said.

“Tesla’s global EV leadership will not be threatened even by the
most aggressive competitors, we believe. The only negative takeaway from this year’s survey is Tesla’s shrinking lead in China, where local BEV brands display strong positive momentum.”

Tesla on Saturday also set April 20 as the date for its second-quarter report, expecting to release quarterly figures after the bell. The company also scheduled a conference call with analysts and others at 5:30 p.m. Eastern on that day to discuss the results.

Shares of Tesla were among the biggest gainers on Monday. The stock has risen 73% in the past 12 months, compared with gains of around 14% for the S&P 500 index.
SPX,
+0.81%

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