Tesla (NASDAQ:TSLA) delivered impressive Q4 financial and operating results. For context, it delivered a record number of vehicles in Q4 and surpassed analysts’ sales and earnings estimates. Further, a reduction in COGS (cost of goods sold) per vehicle and solid free cash flows were encouraging.
Despite strong Q4 results, Tesla stock continues to trade in the red and is down about 12.7% this year. Let’s look at the factors limiting the upside in Tesla stock.
Upside Resistance
Tesla’s strong vehicle deliveries came amid ongoing supply-chain challenges. Looking ahead, Tesla CEO Elon Musk remained upbeat and expects to expand manufacturing capacity in 2022. Further, Musk reiterated a 50% increase in deliveries per annum in the coming years. However, he cautioned that supply concerns could limit production in 2022.
Highlighting the supply-chain challenges, Needham analyst Rajvindra Gill stated, “Supply chain shortages weighed on production and the company does not expect any new models this year, which could lead to a deceleration in growth.”
Though Tesla expects to grow deliveries by 50% “over a multi-year horizon,” Gill expected “management to increase the targeted growth rate” due to its high valuation and elevated investor expectations.
While Gill has a Sell rating on Tesla stock, Alexander Potter of Piper Sandler remains bullish and expects the company to beat guidance and deliver 1.58 million vehicles in 2022, representing year-over-year growth of approximately 69%. However, Potter sees chip supply shortages as a limiting factor.
Wall Street’s Take
Wall Street analysts are cautiously optimistic on TSLA stock due to supply concerns and higher commodity costs. Tesla stock has received 17 Buy, 7 Hold, and 6 Sell recommendations for a Moderate Buy consensus rating.
Given the near-term headwinds, hedge funds have been selling TSLA stock. Per TipRanks’ Hedge Fund Trading Activity tool, hedge funds sold 2.8M Tesla shares during the last quarter.
Meanwhile, Tesla’s stock price forecast of $1,107.50 indicates 20.1% upside potential to current levels.
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