'Another major step forward': Here's what 6 Wall Street analysts are saying about Tesla's big earnings beat

Reuters

  • Tesla’s third-quarter earnings report beat expectations on multiple key metrics including cash flow and gross margins. 
  • The electric vehicle automaker also reiterated its goal of 500,000 deliveries in 2020, a statement many analysts were anticipating before the report. 
  • Shares of Tesla soared nearly 5% at the market open on Thursday.
  • Here’s what six Wall Street analysts had to say about Tesla’s third-quarter earnings report. 
  • Watch Tesla trade live here.

Tesla’s third-quarter earnings report beat expectations and sent the stock up as high as 5% at the open on Thursday.

The electric vehicle company had its fifth-straight profitable quarter and surpassed expectations on cash flow, gross margins, and adjusted earnings per share. Third quarter adjusted earnings per share were 76 cents versus the consensus estimate of 55 cents. Tesla reiterated its goal of 500,000 deliveries in 2020. 

Here’s what six analysts said about Tesla following the third quarter earnings report.

1. Wedbush Securities, price target $500, neutral rating 

“We view last night’s quarter from Tesla as another major step forward in the company’s ramp around Model 3 deliveries as well as profitability heading into 2021. The company delivered Street upside across the board with impressive GM (ex credits), which speaks to the manufacturing efficiency and success Tesla is seeing especially out of China with Giga 3 front and center leading the way. With the red ink now in the rear view mirror, the Street is focused on an impressive profitability ramp for Tesla into 2021 which appears right on target based on the numbers Musk & Co. delivered last night, while importantly maintaining its 500k unit delivery numbers for the year which was a pipe dream six months ago.”

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2. RBC Capital Markets, price target $339 (up from $290), underperform rating 

“Reiterated 500k 2020 delivery target, though goal has become more difficult. Our forecast remains ~481k. We raise our 2021 delivery forecast to 766k from 687k. Elon suggested between 840k-1mm; per our survey buy-side expectations in 800-900k range.”

“Ultimately, our Underperform rating on TSLA is more valuation-based, as we believe the current valuation assumes high growth assumptions and perfect execution on China ramp, Model Y ramp, and future European factory ramp and at a faster pace than we believe likely.”

3. Goldman Sachs, price target $455, neutral rating 

“While bears may point to the large contribution from regulatory credit sales in the quarter (the upside from credit sales added more than $0.10 to EPS vs. our estimate), we’d note that automotive gross margin excluding credits was still strong which we view as a good sign of the underlying profit potential for the company.” 

“We maintain our Neutral rating on TSLA shares. While we are positive on long-term EV adoption, we believe that the stock’s current share price is already discounting at least 10 mn units and a mid to high teens EBIT margin in the long-term (which would make Tesla the most profitable auto company globally). We’d look to be more positive on the stock if we expected Tesla’s auto business to exceed this and/or if we were more positive on its opportunity in Energy.” 

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4. JPMorgan, price target $80 from $75, underweight rating 

“We remain very wary on valuation.” 

“Although both technology and execution risk seem substantially less than was once feared, expansion into higher volume segments with lower price points seems fraught with greater risk relative to demand, execution, and competition. Meanwhile, valuation appears to be pricing in upside related to expansion into mass-market segments well beyond our volume forecasts for the Model 3.” 

5. Piper Sandler, price target $515, overweight rating 

“With every passing quarter, the company’s financial condition improves further. Operating margins are expanding toward double-digits, and the balance sheet has been substantially de-risked. Indeed, one of Tesla’s primary challenges is finding ways to quickly/efficiently deploy its cash hoard, which now exceeds $14B. Free cash flow has been consistently positive (nearly $1B over the last 12 months), and capex/opex efficiency continues to impress.” 

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6. Credit Suisse, price target $400, neutral rating 

“Helping Tesla’s beat was a better-than-expected result in regulatory credit revenue … Tesla now expects reg credit revenue to more than double in 2020. We think the reg credit contribution somewhat reduces the quality of the beat given lumpiness of this revenue stream, and we could see some arguing against Tesla inclusion in the S&P 500 given the importance of reg credit revenue (we don’t hold this view, but others do). Nevertheless, we more broadly are positive on the reg credit revenue opportunity in the future – while this revenue stream will likely eventually go away in the very long-term, for now we believe it is an opportunity for Tesla, and Tesla is right to maximize its competitive advantage in EV to capitalize on this revenue opportunity. “

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