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TSLA

Tesla

$305.78

16.86 (5.84%)

10:44
10/25/18
10/25
10:44
10/25/18
10:44

Tesla rises as analysts digest first profit in two years

Shares of Tesla (TSLA) are on the rise after the company reported third quarter results, with a net profit of $312M, the electric-vehicle maker's largest ever. Tesla also said deliveries of its Model 3 grew to 56,000, adding that it "was the best-selling car in the U.S. in terms of revenue and the 5th best-selling car in terms of volume." Following the announcement, Wolfe Research analyst Dan Galves upgraded Tesla to Outperform, while several other firms raised their targets on the stock. Nonetheless, some Wall Street analysts remain bearish on Tesla, telling investors to "not get used to [this quarter's profitability.]" RESULTS: Last night, Tesla reported third quarter adjusted earnings per share of $2.90 and revenue of $6.82B, both above consensus of (19c) and $6.3B, respectively. The company said that, "Model 3 quarterly production and deliveries should continue to increase in the fourth quarter compared to the third quarter. Our target of delivering 100,000 Model S and X vehicles this year remains unchanged. We expect gross margin for Model 3 to remain stable in the fourth quarter as manufacturing efficiencies and fixed cost absorption offset a slightly lower trim mix and the negative impact of tariffs from Chinese sourced components. For all three vehicles, additional tariffs in the fourth quarter on parts sourced from China will impact our gross profit negatively by roughly $50M [...] The third quarter of 2018 was a truly historic quarter for Tesla. Model 3 was the best-selling car in the U.S. in terms of revenue and the 5th best-selling car in terms of volume. With average weekly Model 3 production through the quarter, excluding planned shutdowns, of roughly 4,300 units per week, we achieved GAAP net income of $312M." WOLFE RESEARCH SAYS BUY TESLA: In a post-earnings research note, Wolfe Research's Galves upgraded Tesla to Outperform from Peer Perform, with a $410 price target. Saying that "Tesla became a real company," the analyst argued that third quarter non-GAAP earnings of $2.90 and free cash flow of $881M are proof that Tesla's earnings power is likely to outperform traditional automakers. Management's focus on cost and capital efficiency boosted Galves' confidence that priorities have changed from unit growth at all cost to profitable growth and self-funding. Further, the analyst argued that demand and margin outlook appear "very positive" and the fact that 50% of trade-ins on the Model 3 are non-luxury vehicles indicates the buyer base is likely bigger than expected. Also bullish on the stock, Piper Jaffray analyst Alexander Potter raised his price target for Tesla to $396 from $389 as he believes the company reported a "milestone quarter," with margins, earnings, and cash flow easily beating expectations. While there is a still a lot of "hair" on the company, bears will struggle to poke holes in the results, Potter contended, adding that Tesla appears increasingly likely to achieve financial self-sufficiency. The analyst reiterated an Overweight rating on Tesla shares. Oppenheimer, JMP Securities, and RBC Capital also raised their price targets on the stock. 'DON'T GET USED TO IT': Still bearish on Tesla shares, UBS analyst Colin Langan reiterated a Sell rating on the stock in a research note titled "Profitability at last, just don't get used to it." The analyst continues to expect Model 3 average selling prices to decline into fourth quarter and 2019 as Tesla begins delivering the new $46,000 mid-range model. Voicing a similar opinion, Needham analyst Rajvindra Gill told investors that while Tesla posted its first quarterly profit and positive free cash flow in over two years thanks to higher-margin Model 3 sales, he remains concerned over margin in the first half of 2019 given an "unfavorable mix shift of Model 3s, decline in ZEV sales, service margins stay in -35%-40% and pricing pressure on Model S/X." Gill also questions the speed and profitability of Tesla's production of a $45K car, "not to mention the $35K version", in order to match its backlog of orders. The analyst reiterated an Underperform rating on the shares. PRICE ACTION: In morning trading, shares of Tesla have gained about 5% to $302.46.

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    Oct

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    Dec

TSLA Tesla
$305.78

16.86 (5.84%)

10/25/18
BARD
10/25/18
NO CHANGE
Target $411
BARD
Outperform
Tesla results changing company narrative, says Baird
Baird analyst Ben Kallo noted Tesla beat his and consensus estimates across the board, highlighted by strong free cash flow, which should help bolster the balance sheet and mitigate concerns over cash burn. The analyst feels the quarter should change the narrative on the company as it transitions to becoming sustainably profitable. Kallo reiterated his Buy rating and $411 price target on Tesla shares.
10/25/18
OPCO
10/25/18
NO CHANGE
Target $418
OPCO
Outperform
Tesla price target raised to $418 from $385 at Oppenheimer
Oppenheimer analyst Colin Rusch raised his price target for Tesla to $418 from $385 after the company delivered positive cash flow in Q3 well ahead of expectations at $740M in free cash flow. All eyes now turn to the 2019 debt maturities, capital needs for its China capacity expansion, and depth of demand for Model 3, he contends. With about $890M in convertible notes due March 2019 with a strike price of $359.87 and about $525M due November 2019 at $759.36, the analyst expects Tesla to hope shares trade above the March 2019 conversion price and pursue a new fixed income instrument to address capex and the November 2019 converts. Rusch reiterates an Outperform rating on the shares.
10/25/18
WOLF
10/25/18
UPGRADE
Target $410
WOLF
Outperform
Tesla upgraded to Outperform from Peer Perform at Wolfe Research
Wolfe Research analyst Dan Galves upgraded Tesla to Outperform from Peer Perform with a $410 price target. Galves said Q3 non-GAAP earnings of $2.90, versus consensus of 3c, and free cash flow of $881M is proof that Tesla's earnings power is likely to outperform traditional automakers. Management's focus on cost and capital efficiency boosted Galves' confidence that priorities have changed from unit growth at all cost to profitable growth and self-funding. Galves said demand and the margin outlook appears "very positive" and the fact that 50% of trade-ins on the Model 3 are non-luxury vehicles indicates the buyer base is likely bigger than expected.
10/25/18
10/25/18
UPGRADE

On The Fly: Top five analyst upgrades
Catch up on today's top five analyst upgrades with this list compiled by The Fly: 1. Caterpillar (CAT) upgraded to Hold from Sell at DZ Bank with analyst Robert Czerwensky upgrading the stock but lowering his price target to $119 from $127. 2. Tesla (TSLA) upgraded to Outperform from Peer Perform at Wolfe Research with analyst Dan Galves saying Q3 non-GAAP earnings of $2.90, versus consensus of 3c, and free cash flow of $881M is proof that Tesla's earnings power is likely to outperform traditional automakers. 3. Hilton (HLT) upgraded to Buy from Neutral at B. Riley FBR with analyst Jeffrey Donnelly saying the significant year-to-date underperformance of the shares, the majority of which took place in October, has created an attractive entry point. 4. Owens Corning (OC) upgraded to Overweight from Equal Weight at Barclays with analyst Matthew Bouley saying "Diminishing headwinds" in 2019 to support earnings growth off of a depressed base. 5. TripAdvisor (TRIP) upgraded to Neutral from Underperform at Credit Suisse with analyst Stephen Ju citing upcoming quarterly results. This list is just a portion of The Fly's full analyst coverage. To see The Fly's full Street Research coverage, click here.

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