Shares of electric car giant Tesla (TSLA) have remained under pressure through much of the first half of the year. There are a few catalysts ahead which should keep investors interested for the rest of 2021.
Emmanuel Rosner of Deutsche Bank remains optimistic about Tesla’s prospects in the near future. Rosner maintains a Buy rating and a price target of $900, stating, “Tesla’s strong and accelerating growth profile, and its widening technology and cost leadership should support a higher valuation.”
The target price reflects an upside potential of 32.6% from Friday’s closing share price of $678.90. (See Tesla stock chart on TipRanks)
Q2 Car Delivery Numbers
On July 2, Tesla provided an update regarding its car delivery and vehicle production for Q2.
Rosner noted that Tesla’s total car deliveries were 201,250 in Q2, largely in line with its expectations of 200k and consensus estimate of 201k. Sales of Model 3/Y hit 199k were also in line with the analyst’s expectations, but well ahead of the consensus estimate for 194k deliveries. On the contrary, sales of S+X models remained below the consensus level, which the analyst believes, “reflect stale sell-side inputs.”
Furthermore, total cars produced in Q2 were 206k, in line with Rosner’s expectations of 205k. Rosner stated that although a global chip shortage aroused concerns around automakers’ ability to ramp up car production, Tesla “demonstrated very limited impact from the industry-wide semiconductor shortage.”
Q2 Projections
Rosner does not seem to be very optimistic about Tesla’s Q2 earnings, which are expected to release on the 28th of this month.
Prior to Tesla’s car delivery report, Rosner decreased his Q2 revenue expectations to $11.1 billion from $11.6 billion. Also, the analyst reiterated Tesla’s expected automotive gross margin of 23.5%, but lowered its earnings projections to $0.97 from its prior expectations of $1.07.
Catalysts Remain
Tesla has announced its plans to release a new, fully self-driving car, based on the next-generation software dubbed FSD v9, along with a subscription service.
Though the launch has been pushed off a few times, the four-star analyst views this launch as a big positive which should help Tesla to expand its customer base and increase its sales substantially. The analyst stated that the new FSD Beta Version 9 “could increase the consumer adoption rate materially, given how expensive the FSD option is now ($10k upfront).”
Furthermore, the analyst expects the incremental sales to lead to “meaningful” margin upside for the company.
Battery Business to Boom
The analyst remains optimistic about Tesla’s battery business. He feels confident about the company’s new technological and manufacturing developments in this space, such as improvement in battery chemistry, cost reduction, and deeper cell and vehicle integration. Through these initiatives, management expects to meet its mid-term goals of a 56 percent/ kWh total cost reduction over the next 3-4 years.
Rosner believes that if the company is able to meet its set goals, the lower-than-expected cost of the battery “could help accelerate the world’s shift to electric vehicles and extend Tesla’s EV lead considerably.”
On TipRanks, Tesla has a Hold average analyst consensus rating, based on 10 Buys, 7 Holds, and 7 Sells. The stock has an average TSLA price target of $608.36, reflecting approximately 10.4% downside potential over the next 12 months.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
