What You Missed This Week in EVs and Clean Energy

Institutional investors and professional traders rely on The Fly to keep up-to-the-second on breaking news in the electric vehicle and clean energy space, as well as which stocks in these sectors that the best analysts on Wall Street are saying to buy and sell.

From the hotly-debated high-flier Tesla (TSLA), Wall Street’s newest darling Rivian (RIVN), traditional-stalwarts turned EV-upstarts GM (GM) and Ford (F) to the numerous SPAC-deal makers that have come public in this red-hot space, The Fly has you covered with “Charged,” a weekly recap of the top stories and expert calls in the sector.

QUARTERLY RESULTS: On Tuesday, Tesla reports second quarter adjusted earnings per share of 91c and revenue of $24.9B, both above consensus at 82c and $24.48B, respectively. The company said that, “Q2-2023 was a record quarter on many levels with our best-ever production and deliveries and revenue approaching $25B in a single quarter. We are excited that we were able to achieve such results given the macroeconomic environment we are currently in.”

The EV-maker also reported Q2 operating cash flow of $3.1B, free cash flow of $1B, and operating margin of 9.6%. Tesla added that, “We are planning to grow production as quickly as possible in alignment with the 50% CAGR target we began guiding to in early 2021. In some years we may grow faster and some we may grow slower, depending on a number of factors. For 2023, we expect to remain ahead of the long-term 50% CAGR with around 1.8 million vehicles for the year. We have ample liquidity to fund our product roadmap, long-term capacity expansion plans and other expenses. Furthermore, we will manage the business such that we maintain a strong balance sheet during this uncertain period. While we continue to execute on innovations to reduce the cost of manufacturing and operations, over time, we expect our hardware-related profits to be accompanied by an acceleration of AI, software and fleet-based profits. Cybertruck remains on track to begin initial production later this year at Gigafactory Texas. In addition, we continue to make progress on our next generation platform.”

Following the results, several Wall Street firms raised their price targets on the stock. Among those were Mizuho that upped the firm’s price target on Tesla to $330 from $300, while keeping a Buy rating on the shares. The firm says Tesla is driving affordability and profitability at scale. With a weaker consumer and higher rates, Tesla has been leveraging price to drive volume, at the expense of profitability, but the company continues to set the profitability benchmark, Mizuho added.

Wedbush also raised the firm’s price target on Tesla to $350 from $300, maintaining an Outperform rating on the shares. The firm says Wednesday night was “another poker win for the Tesla story” as Musk & Co. came in with Auto gross margin of 18.1%, which was above the Street’s line in the sand and whisper numbers of 17.5%. While margins are clearly coming down significantly from the mid 20% level over the past year, this was the smart strategy for Tesla to catalyze volumes as the multiple price cuts have been in a homerun success in China, Europe, and the U.S., Wedbush argues. Tesla still expects to see deliveries in the 1.8M range for 2023 with some production downtime in Q3 for factory upgrades, which the firm believes are the drumroll to some Model 3 refreshes around the corner. Wedbush would characterize the overall quarter as better than expected with commentary generally optimistic with some macro caveats.

MOVING TO THE SIDELINES: UBS downgraded Tesla to Neutral from Buy with a price target of $270, up from $220. The firm thinks the recent strong share performance fully reflects the strong demand response seen after Tesla’s price cuts, as well as a solid execution in 2024. The company’s Q2 results validated the pricing strategy with a small decline in auto gross margin despite a decline in average selling price by $900 per car quarter-over-quarter, UBS adds. Going forward, upside risk to consensus estimates “seems very limited” because Tesla’s strong execution is already fully reflected, the firm says. UBS continues to see Tesla globally leading the race to affordable electric and autonomous mobility, but says that on a one-year view, the stock’s risk/reward looks balanced.

Click here to check out Tesla’s recent Media Buzz Sentiment as measured by TipRanks.

RECALL: Tesla is recalling up to 15,869 2021-2023 Model S and Model X vehicles due to a fault with the seat belts, according to a NHTSA filing. Front-row seat belts may not be connected properly to the pretensioner anchors, which can cause the seat belts to detach, according to the filing. The company will also recall as many as 1,337 2023 Model S, Model X, and Model Y vehicles as the forward-facing camera may be misaligned.

SELL XPENG: JPMorgan downgraded XPeng (XPEV) to Underweight from Neutral with a price target of $10, up from $7.50. The firm expects the stock to pull back into the results season and believes it won’t deliver a “satisfactory margin” in the second half of 2023. JPMorgan is cautious going into the interim result season and revised down earnings forecasts for most car makers and dealers. Weak Q2 earnings should not be a surprise to investors considering the weak pricing environment, but the magnitude of the miss could still be, the firm tells investors in a research note. JPMorgan expects the Street to follow its downward forecasts.

DOWNTURN: Wolfe Research downgraded Enphase Energy (ENPH) to Peer Perform from Outperform without a price target. The firm says a rates-driven downturn in U.S. residential solar is tracking worse than it expected. Wolfe Research sees another guidance miss for Q3 and notes Enphase’s hyper Europe growth may slow. Enphase remains a high-quality company and its valuation is now less extended, but the company needs to see better visibility on a U.S. recovery, the firm tells investors in a research note.

POLY THESIS PLAYED OUT: Citi upgraded First Solar (FSLR) to Neutral from Sell with a price target of $208, up from $189. The firm says its thesis of poly falling below $10/kg leading to lower panel pricing has played out. In addition, implications of domestic content guidance are now fully reflected in the shares as the Q2 consensus earnings estimates appear achievable, it adds. Citi also believes First Solar’s near-term financing concerns have been addressed.

TOUGH FUNDAMENTAL LANDSCAPE: Citi downgraded Sunnova Energy (NOVA) to Neutral from Buy with a price target of $25, down from $26, after a different analyst at the firm assumed coverage of the name. The firm sees a tough fundamental landscape for residential solar companies and prefers the utility-scale names. Citi’s economic team expects a second rate hike in November, which will further increase the cost of capital for installers and may coincide with California demand bottoming, the firm tells investors in a research note.

BMO Capital also downgraded Sunnova Energy to Market Perform from Outperform with a price target of $25, down from $27. The company continues to drive attractive customer growth across the interest rate cycle while maintaining contract margins, and it also has significantly less exposure than peers to California NEM 3.0 as growth slows in the state, BMO tells investors in a research note. However, the firm believes these positives are increasingly reflected in the stock price relative to peers as Sunnova shares have outperformed peers year-to-date.