Tesla (TSLA) announced Monday that in cooperation with Chinese efforts to slow the spread of Omicron Covid 19, it will shut down production at its Shanghai gigafactory for four days “to carry out mass testing for COVID 19.” These are four days in addition to the two days the Chinese gigafactory was shut down earlier this month — so six days total in the month of March, or nearly a week of lost production.
And that’s okay — at least, according to Deutsche Bank analyst Emmanuel Rosner.
As Rosner calculates, the six days of lost production will cut Tesla’s Chinese electric car output by about 5,000 units in Q1 2022. (Q1 ends on March 31, along with this new four-day shutdown). But even so, the analyst calculates that Tesla will end up delivering 320,000 electric cars globally this quarter — a 73% increase year over year, and above the 310,000 consensus forecast of other analysts who follow the company.
In dollars and cents, Rosner further calculates that this will dampen Tesla’s sales slightly, such that the company will end up with $18.4 billion in revenue this quarter. On the plus side, however, he sees gross profit margins coming in at 27.5% for the quarter (ahead of his previous estimate), resulting in earnings likewise ahead of his previous forecast — $2.36 per share instead of $2.33 per share. And this earnings estimate, too, is ahead of Wall Street consensus forecasts.
How did Tesla manage this?
Rosner credits Tesla’s “operational execution in the face of large industry supply chain challenges… its pricing power… [and its] strong purchasing power, and ability to diversify its battery chemistry to minimize use of expensive inputs” with making it possible for Tesla to “more than offset steep raw materials pressure” and keep its profit margins elevated.
In particular, Rosner says he’s “impressed” with how Tesla has been able to push through no fewer than 10 separate price increases “in 2021 alone… followed by some more substantial raises in March 2022.” As a result of all these price increases, the sticker price on Tesla’s various electric car models have grown by anywhere from 13% to as much as 28% — such that Tesla is easily able to pass along higher raw materials costs to its customers. More than that, Rosner notes that “both prices and vehicle waiting times are getting longer/higher, and not shorter.”
In other words, the higher Tesla raises its prices — the more people line up to buy its cars!
As Tesla ramps up production at its newest gigafactory near Berlin, Germany (100,000 cars expected this year, en route to 500,000 by 2023 or 2024, and eventually perhaps 1 million or more per year thereafter), Rosner sees Tesla capitalizing on this insatiable demand for its products. Full-year, he forecasts that Tesla will sell just under 1.5 million cars in 2022 and collect $89.3 billion in revenue.
Based on the above, Rosner rates Tesla a Buy and values the stock at $1,200 a share. (To watch Rosner’s track record, click here)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
