Shares of Tesla rose 12% on Thursday after the electric vehicle maker reported fourth-quarter earnings.
Wall Street was mixed on results as some worry about a decline in profits due to its recent price cuts.
Here’s what Wall Street analysts had to say about Tesla’s earnings report and outlook for 2023.
Tesla rose as much as 12% on Thursday after its fourth-quarter report beat analyst estimates and included a positive outlook for 2023.
The stock has struggled in recent weeks as investors worry about the impact recent vehicle price cuts will have on Tesla’s profit margins. But CEO Elon Musk said he was experiencing the strongest demand in his history after implementing the price cuts.
Here are the key numbers:
Sales: $24.3 billion, versus estimates of $24.2 billion
Adjusted earnings per share: $1.19, up from estimates of $1.13
Automotive Gross Margin: 25.9%, compared to 27.9% in the previous quarter
“It was a great year for Tesla. It was our best year ever across the board… delivered over 1.3 million cars and achieved an operating margin of 17%… while doing so, we generated net income of $12.5 billion and net income of $7.5 billion in free cash flow,” Musk said on the earnings call.
He also said that Tesla is aiming for 1.8 million vehicle deliveries in 2023 and that the potential to hit a 2 million target is possible if everything goes smoothly. “We’re not committing to that, but I’m just saying this is the potential.”
Here’s what Wall Street is saying about Tesla’s fourth-quarter earnings report.
Goldman Sachs: “Strong orders at lower prices”
“Tesla commented that since lowering prices it has seen the strongest year-to-date orders in its history, with orders exceeding double production. Although we believe this rate of orders may not be sustained in light of the weak environment macroeconomically, I would suggest the company is tracking well our $1.8 million delivery estimate,” said Goldman Sachs analyst Mark Delaney.
“However, in our view, an incremental negative was cost per vehicle impacting gross margin in 4Q22, and costs are higher than we previously expected for 2023 (Tesla cited lithium and, in its view, time, battery costs as a key year-over-year cost driver for 2023).”
Goldman Sachs rates Tesla at “Buy” with a $200 price target.
Wedbush: “The right strategic move in poker”
“Musk & Co. delivered epically with demand currently 2x production heading out of the gates in 2023 and forecasts a bogeyman of 1.8 million deliveries for the year which was exactly what the bulls wanted to hear and the bears will (for now) go back to hibernation,” said Wedbush analyst Dan Ives.
“While in the near term Tesla is sacrificing margins for higher volumes, we believe this is the right strategic move to put an iron fence around its customer base and fend off growing EV competition from Detroit, Europe and China. “.
Wedbush rated Tesla at “Outperform” and raised its price target to $200 from $175.
JPMorgan: ‘Margin disappoints even before impact of big price cuts’
“Note that the weaker trend and below-consensus adjusted automotive gross margin precede the impact of large price cuts that will be felt primarily starting in Q1 23; therefore, we view the margin trajectory negatively and We expect consensus margin expectations to decline more toward our forecast (we expect 21.7% in 2023, down from 26.7% in 2022),” said JPMorgan analyst Ryan Brinkman.
“Ahead of 3Q22 earnings, the company’s compiled consensus for 2023 deliveries was 1,949,000 (+43% year-over-year)—now, the company is driving 2023 deliveries of 1.8 million (+ 37% YoY), which is -8% lower than analysts expected just several months ago, despite prices averaging -10% lower.This to us suggests the potential for a cycle of negative earnings revisions .”
JPMorgan rates Tesla as “underweight” with a $120 price target.
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