tiprankstipranks

Tesla: Short-Term Jitters but Well-Positioned to Shine

Tesla, Inc. (NASDAQ: TSLA) rose over 8% on Monday after the company announced that it was mulling a new stock-split plan. The EV maker plans to seek approval to split common stock in the form of stock dividends at its annual stockholders’ meeting.

The last time Tesla announced a stock split (5-for-1) was in August 2020.

The stock split, if approved, will make TSLA stock affordable for retail investors, which in turn will boost demand for the stock that has witnessed a 40.8% rise in the past six months, 78.6% in the last year, and a whopping 1,850.8% in the last three years.

Founded in 2003, Tesla promotes clean energy by designing, manufacturing and selling EVs, battery energy storage systems, solar panels and solar roof tiles, among others. It also operates a network of vehicle service centers and Supercharger stations.

The company introduced its first vehicle, Model S, in 2008. The EV was the world’s first premium all-electric sedan. In 2015, Tesla added Model X SUV to its lineup, followed by Model 3 in 2016; Tesla Semi truck in 2017; and Model Y SUV and Cybertruck in 2019.

Ahead of the release of Tesla’s delivery and production figures for the first quarter of 2022, Deutsche Bank (NYSE: DB) analyst Emmanuel Rosner lowered his estimates following the shutdown of the company’s Shanghai factory due to COVID-19 restrictions in China.

Let’s have a look at the analyst’s projections.

Q1 Estimates Revised

Rosner expects Tesla to report vehicle deliveries of 320,000 in the first quarter of this year, down from the earlier estimate of 325,000 units. However, the projection continues to remain above the consensus estimate of 310,000 units.

The analyst has also offered a break-up of his estimates on the basis of models. He expects the company to deliver 166,000 units of Model Y, 141,000 units of Model 3, and 13,000 units of Model S and Model X during the quarter.

Further, Rosner has lowered the first-quarter revenue estimate to $18.4 billion from $18.9 billion anticipated earlier but has increased automotive gross margin projection from 26.4% to 27.5% as the additional cost of a new factory will be recorded later than expected. This has also helped boost EPS estimate to $2.36 from $2.33.

The analyst’s revised expectations are still higher than the consensus estimate for revenue and EPS, which stand at $17.7 billion and $2.26, respectively.

Projections Raised for 2022

For full-year 2022, Rosner said, “Beyond the quarter, we remain impressed with Tesla’s operational execution in the face of large industry supply chain challenges, and with its pricing power which could enable it to more than offset steep raw materials pressure.”

He expects vehicle deliveries to total 1.49 million units in 2022, up from the earlier projection of 1.45 million and the Street’s estimate of 1.46 million. Rosner thinks the speed at which the company can increase production at its recently-opened Berlin factory offers an upside potential to his estimates.

Additionally, the analyst has raised his 2022 revenue and EPS estimates to $89.3 billion and $12, respectively, from $87.6 billion and $11.20. The consensus EPS estimate for the year is $10.55.

He expects Tesla’s 2022 automotive gross margin to come in at 28.5%, higher than the previously anticipated 27.9%, “given the company’s superior negotiating power on both the cost and revenue side.”

Meanwhile, over the next two years, the EV giant is likely to record capital expenditure in the range of $5 billion to $7 billion, the analyst added.

Valuation

Rosner has maintained a Buy rating on the stock with a price target of $1,200, which is based on 60x 2025 EPS and EV/sales multiple of 12.6x 2023.

The analyst said, “The company’s strong and accelerating growth profile (through new factory ramps, its widening technology (battery cells and full self-driving beta) and cost leadership should support the above-average valuation.”

Price Target

Overall, the stock has a Moderate Buy consensus rating based on 15 Buys, five Holds and six Sells. Tesla’s average price target of $1,053.50 implies 3.5% downside potential.

Website Traffic

TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (NYSE: SEMR), the world’s biggest website usage monitoring service, offers insight into Tesla’s performance.

According to the tool, compared to the previous year, Tesla’s website traffic registered a 17.8% decline in global visits in February. Moreover, the website traffic has decreased 37.6% year-to-date against the same period last year.

Conclusion

The next 12-18 months are very crucial for Tesla as supply dynamics will continuously change due to Russia’s invasion of Ukraine and the turmoil it has caused across the world. It remains to be seen how the EV maker executes its plans amid rising inflation and unemployment, chip shortage, and the spread of the latest COVID-19 variant BA.2.

Rosner is of the opinion that the company is “well-positioned to deal with current macro challenges, capitalizing on its long-term contracts, strong purchasing power, and ability to diversify its battery chemistry to minimize the use of expensive inputs.”

Download the TipRanks mobile app now.

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Read full Disclaimer & Disclosure