Wedbush expects another "robust" quarter for Tesla, an opinion shared by Morgan Stanley
Tesla (TSLA) is expected to report results on its third fiscal quarter on Wednesday, October 20, with a conference call scheduled for 5:30 pm EDT. What to watch for:
1. OUTLOOK, CHIP SHORTAGE: Tesla said in its last quarterly update letter that, "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. The rate of growth will depend on our equipment capacity, operational efficiency, and the capacity and stability of the supply chain. We have sufficient liquidity to fund our product roadmap, long-term capacity expansion plans and other expenses. We expect our operating margin will continue to grow over time, continuing to reach industry-leading levels with capacity expansion and localization plans underway."
The electric vehicle maker also said it was on track to build first Model Y vehicles in Berlin and Austin in 2021. "We believe we remain on track to build our first Model Y vehicles in Berlin and Austin in 2021. The pace of the respective production ramps will be influenced by the successful introduction of many new product and manufacturing technologies, ongoing supply-chain related challenges and regional permitting. To better focus on these factories, and due to the limited availability of battery cells and global supply chain challenges, we have shifted the launch of the Semi truck program to 2022. We are also making progress on the industrialization of Cybertruck, which is currently planned for Austin production subsequent to Model Y."
Meanwhile, Tesla also noted that it has shifted launch of its Semi truck program to 2022.
Late last month, Tesla CEO Elon Musk said he thinks chip shortage is a "short-term" problem as opposed to a long-term one, CNBC's Sam Shead reported. "There's a lot of chip fabrication plants that are being built and I think we will have good capacity by next year," the executive said at an Italian tech event.
2. 'PRETTY GOOD' RESULTS EXPECTED: Morgan Stanley analyst Adam Jonas kept an Overweight rating and $900 price target on Tesla ahead of the company's third quarter results. The quarter "should be pretty good" after the company posted a deliveries beat of nearly 10% "while the rest of the industry is scrambling," Jonas told investors in a research note on Tuesday. The analyst pointed out that the price target assumes less than 6M units produced annually by 2030, or roughly half of what CEO Elon Musk has targeted. Over the next few years, Jonas expects to see a "proliferation of Tesla segments to include compact, pickup truck, HD truck, people-mover/ride share, delivery van, a true Model X replacement, and much more." Tesla essentially only sells two products today, the 3 and Y, the analyst added.
On Monday, Wedbush analyst Daniel Ives told investors in a research note that he expects Tesla to report another "beat across the board" this week and exceed Street estimates of $13.7B and $1.54, respectively. The analyst noted that earlier this month Tesla announced 241,000 deliveries versus the Street's 221,000 and bull case whisper numbers in the 225,000/230,000 range. With the chip shortage a major overhang on the auto space and logistical issues globally, these delivery numbers combined with this week's likely earnings beat speaks to an EV demand trajectory that looks quite "robust" for Tesla heading into the fourth quarter and 2022, Ives contended. The analyst has an Outperform rating and a price target of $1,000 on the shares.
3. Q3 DELIVERIES: Earlier this month, Tesla announced that in the third quarter, the company produced 237,823 vehicles and delivered 241,300. Model S/X production was 8,941 and deliveries were 9,275. Model 3/Y production was 228,882 and deliveries were 232,025. The total subject to operating lease accounting was 7%. Tesla also said, "Our delivery count should be viewed as slightly conservative, as we only count a car as delivered if it is transferred to the customer and all paperwork is correct. Final numbers could vary by up to 0.5% or more."