Analyst Pierre Ferragu increased his price target to $1,000 a share, the highest on Wall Street.
Photograph by Sean Gallup/Getty ImagesTesla’s first-quarter earnings marked the third straight quarterly “beat” of Wall Street expectations. The results will nettle the bears and delight the bulls.
Here’s what analysts are saying about the Wednesday evening report.
“Investors were laser focused on the profitability picture of [Tesla] and Musk & Co. did not disappoint,” Wedbush analyst Dan Ives said in a Thursday research report. Gross profit margins came in at 20.6%. Wall Street was looking for about 18%. Stronger profits is a sign of good manufacturing execution. Tesla recently started making cars in China, adding to its Fremont, Calif., capacity.
Ives rates shares the equivalent of Hold. He raised his price target from $425 to $600 and said his “bull case” for shares is $1,000. Ives is neutral, but there are still plenty of bearish analysts to hear from.
“Dream lives on,” RBC analyst Joe Spak wrote in his Thursday research report. He isn’t buying into the dream though. He rates shares the equivalent of Sell, but he did increase his price target from $380 to $615 a share. Despite some positives, like profitability, he remains cautious. “Bullishness is very high; we can’t recommend adding believing that current price more than discounts positive arguments.”
J.P. Morgan analyst Ryan Brinkman left his rating at the equivalent of Sell and his price target at $240. “Our Underweight rating considers notable investment positives, including a highly differentiated business model, appealing product portfolio, and leading-edge technology,” Brinkman said in a research report on Thursday. But he believes all the positives are more than offset by “above-average execution risk and valuation that seems to be pricing in a lot.”
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New Street Research analyst Pierre Ferragu took a different tack than Brinkman. He increased his price target from $800 to $1,000 a share, the highest on Wall Street for now. He rates shares the equivalent of Buy.
The thing Ferragu focused on in his Thursday research report, like Ives, was profitability. “Model Y already profitable with 5,000 units produced,” he said. “Model 3, S, X ex-subsidy gross margin up [2 percentage points] sequentially.” The stronger profitability led him to increase profit margin estimates justifying the price-target increase.
“In response to Covid-19 headwinds, [Tesla] withdrew 2020 guidance,” noted Baird analyst Ben Kallo in a Thursday research report. That is one slight negative he saw in the earnings report. “The company indicated it has the installed capacity to exceed the prior guidance of 500,000 vehicle deliveries—despite downtime—though given uncertainty around production restart and supplier availability the company will not provide near-term net income or cash flow guidance.”
Kallo, a long time Tesla bull, rates share the equivalent of Hold. He raised his price target Thursday from $525 to $700 a share.
The state of the supply chain is a good catch. Coordinating plant restarts around the country with different firms facing different mandates is no trivial issue. Restart headwinds and complexity are weighing on CEO Elon Musk’s nerves. Commenting on governmental stay at home orders he said: “To say [people] cannot leave their house, and they will be arrested if they do, this is fascist. This is not democratic. This is not freedom.”
The lack of guidance wasn’t hurting shares in the morning. But the stock ended down 2.3% Thursday to $781.88 a share. Tesla’s nearly 90% year-to-date gains still far exceed comparable drops of the S&P 500 and Dow Jones Industrial Average.
Write to Al Root at allen.root@dowjones.com
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