Shares of Tesla (TSLA) are under pressure as investors and Wall Street analysts digest the company’s first quarter results that beat estimates, helped by sales of bitcoin and regulatory credits. While Goldman Sachs analyst Mark Delaney raised his price target on the stock to $860 following last night's report, his peer at Citi argued that Tesla's results will likely be viewed as "underwhelming."
RESULTS: Tesla reported first quarter non-GAAP earnings per share of 93c and revenue of $10.39B, both above consensus of 79c and $10.29B, respectively. "In Q1, we achieved our highest ever vehicle production and deliveries. This was in spite of multiple challenges, including seasonality, supply chain instability and the transition to the new Model S and Model X. Our GAAP net income reached $438M, and our non-GAAP net income surpassed $1B for the first time in our history. While the ASP of our vehicles declined in Q1, our auto gross margin increased sequentially, as our costs decreased even faster […] Due to the launch of new products and new factories and the reduced mix of Model S and Model X, our average cost declined to sub-$38,000 per vehicle in Q1," the company said.
Tesla also backed its view for 2021 growth in vehicle deliveries above 50%. Tesla said: "We plan to grow our manufacturing capacity as quickly as possible. Over a multi-year horizon, we expect to achieve 50% average annual growth in vehicle deliveries. In some years we may grow faster, which we expect to be the case in 2021. [...] We expect our operating margin will continue to grow over time, continuing to reach industry-leading levels with capacity expansion and localization plans underway. We are currently building Model Y capacity at Gigafactory Berlin and Gigafactory Texas and remain on track to start production and deliveries from each location in 2021. Gigafactory Shanghai will continue to expand further over time. Tesla Semi deliveries will also begin in 2021."
Back in February, Tesla said it had purchased $1.5B in bitcoin. On Monday, the company's CFO said the EV maker had sold 10% of that holding. Bitcoin was used while "looking for a place to store cash that wasn't immediately being used" and preserve liquidity, Tesla said.
'DEMAND LOOKS ROBUST': Following the results, Goldman Sachs analyst Mark Delaney raised the firm's price target on Tesla to $860 from $835 and kept a Buy rating on the name. Tesla's first quarter deliveries hit an all-time high, with management saying its order rate was the strongest in company history, Delaney highlighted. The analyst believes there were positive signs for both revenue growth and margins, including auto gross margins of 22%, comments on an improving supply landscape and changes in its solar roof pricing strategy. Delaney expects Tesla's sales and margins to continue to move higher.
Commenting on the company's quarterly results, Wedbush analyst Daniel Ives pointed out that Tesla gave the Street a better glimpse of its demand and capacity build out globally during the course of 2021. The company had its strongest order intake number in its history during the first quarter despite what is usually a seasonal slowdown coming off a robust fourth quarter, with Model 3 the flagship followed by Model Y driving pent up demand throughout Europe and China, Ives highlighted. While the analyst acknowledged that bears will "laser focus" on the chip shortage spoiling the EV party for Tesla in 2021, he believes the reality is that demand is spiking globally for Tesla's EVs. He also said the company's flagship production build outs in Berlin and Austin appear right on schedule, and the company has a treasure chest and cash flow to fund future R&D/capex endeavors in this EV arms race for the next decade. Ives has an Outperform rating and a price target of $1,000 on Tesla shares.
NO 'SLAM DUNK' DATA: Piper Sandler analyst Alexander Potter reiterated an Overweight rating on Tesla with a $1,200 price target following the company's first quarter results. The analyst noted that the quarter offered relatively few "slam dunk" data points as Tesla didn't shed light on full self-driving software, new production capacity, the ramp of in-house battery cells or any new unforeseen products. As such, he is "not overly shocked by the muted reaction" to the print. Potter cautioned that the next few quarters will be consequential and probably volatile.
Keeping a Buy rating on the shares, Canaccord analyst Jed Dorsheimer lowered his price target on Tesla to $974 from $1071 following mixed quarterly results. The analyst admitted his multiple remains rich but said he believes the company maintains a meaningful market advantage. Further, consistent with his recent upgrade, Tesla is becoming "The Brand" in energy, he contended.
RESULTS LIKELY TO BE VIEWED AS 'UNDERWHELMING: Tesla reported "mixed" first quarter results as auto gross margin was slightly ahead of estimates and free cash flow beat as well, but operating results were below estimates on higher operating expenditure, a non-operating gain and a lower tax rate, Citi analyst Itay Michaeli argued in his own research note. The analyst also highlighted that 2021 outlook commentary was in-line, with additional color provided on the Model S and X ramp. Net-net, Michaeli sees the initial stock reaction as "understandably negative," saying Tesla's "clean" first quarter results were below consensus and are likely be viewed as "underwhelming." He has a Sell rating on the shares with a price target of $159.
Also keeping an Underweight rating on the shares, Barclays analyst Brian Johnson told investors that he believes the bull thesis on the stock has pivoted "from cars to crypto." While the analyst continues to believe Tesla is overvalued, he acknowledged that it is "not clear that a soft quarter will be a significant negative catalyst." Despite enthusiasm of bulls for crypto, he sees "several yellow flags beyond earnings." Tesla seemed to delay the start of production at Texas and Berlin, the prospects for a new 4680 battery that would enable Cybertruck and the Semi, and was uncertain on the timeline for full-self-driving 9.0, he added.
Meanwhile, JPMorgan analyst Ryan Brinkman expects a negative reaction in Tesla shares following the "sizable" EBIT miss relative to consensus expectations. This would have been even larger had it not been for higher-than-expected regulatory credit sales and a gain from the unexpected sale of a portion of the company's position in bitcoin, Brinkman contended. He reiterated an Underweight rating on Tesla shares with a $155 price target.
Also bearish on the stock, GLJ Research analyst Gordon Johnson reiterated a Sell rating on Tesla with a $67 price target. Excluding one-time credit sales and one-time bitcoin trading revenue, Tesla's core business lost $181M in GAAP profit versus a loss of $131M in the fourth quarter, Johnson noted. Said another way, despite record volume sales in the first quarter, due mainly to "aggressive price cuts to move volumes," Tesla's core business of selling cars lost more money in the first quarter than it did in fourth quarter, the analyst added. He believes "this is simply not a viable business model."
PRICE ACTION: In morning trading, shares of Tesla have dropped over 4% to $706.62.
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