Analyst Opinion Is Divided After Tesla's (TSLA) Earnings Call

Record profits and deliveries in Tesla, Inc.'s (TSLA) blockbuster earnings do not seem to have much impressed investors. The company's stock price, which was inching up in anticipation of the earnings call, fell by as much as 5% after the event. It continued its downward trajectory on Jan. 27, 2022, closing out the day down by 11.55% at $829.10, as investors digested its forecast of supply chain issues affecting production at its manufacturing facilities this year.

Key Takeaways

  • Electric carmaker Tesla reported record earnings and profits for the fourth quarter of 2021, but its shares are still tanking.
  • Some analysts are skeptical about its growth this year, given its past record, release schedule, and supply chain issues.
  • Tesla bulls say it is an electric vehicle cash machine and $5 trillion opportunity.

The world's most valuable car company is unique among its peers in that its stock trades at a considerable multiple to its earnings. Its price skyrocketed during the pandemic on the back of an investing frenzy by retail traders and the Biden administration's decision to make electric vehicles a centerpiece of its push to decarbonize the economy. Taking into account the latest decline in its value, Tesla stock has dropped by roughly 28% since the start of this year.

One could argue that a correction is overdue for the company and that this might be it. In keeping with Tesla's ability to provoke sharp opinions among supporters and detractors, analysts are divided over the importance of the recent earnings report.

A Divided Opinion 

Part of the problem with assessing Tesla relates to constantly shifting release dates for the company’s planned platter of consumer products and services. For example, Musk told analysts yesterday that the company was planning to focus on its existing slate of cars and not work on new models like the Cybertruck and the Semi. At the same time, he announced work on a humanoid semi-sentient robot to work in its factories and waxed on about Full Self-Driving (FSD) functionality, which is still undergoing beta tests.

But analyst Toni Sacconaghi from Bernstein Research, who has an underperform rating for the stock, expressed doubt over Tesla's ability to reach 3 million in vehicle sales by 2024. "If there is no $25,000 vehicle being worked on, is it really realistic to think that you can sell more than 3 million vehicles with two very high-volume cars and Cybertruck in 2024?" he asked. Musk parried on a straight answer to that question and said that the "full gravity" of FSD capabilities, which he expects to bring in future profits, was not fully appreciated.

Seth Goldstein, Morningstar analyst, maintained a price target of $700 for Tesla, stating that the company would witness "near-term cost increases." Goldstein continued, "We see higher costs coming from higher raw materials and the startup of two new manufacturing plants, one in Austin, Texas, and the other in Berlin."

Alexander Potter of Piper Sandler said that the fourth quarter's results weren't "completely flawless." As Potter wrote after the earnings call, "Supply chain headwinds are inflating logistics costs while forcing a measured approach to new product introductions." However, he did not change his Buy rating and price target of $1,300 for the stock.

Noted Tesla bull Adam Jonas of Morgan Stanley had a more bullish take and called Tesla an "EV cash machine." Tesla reported gross margins of 29%, the highest among car manufacturers, in its latest earnings call. "The company is annualizing to >1% [free cash flow] yield. Sure it's lower than the legacy auto companies that seem to be in fashion lately. But how many 50% multi-year top line growers on your screen actually generate cash," Jonas wrote in a note. He also has a price target of $1,300 for the stock.

Another Tesla cheerleader Wedbush Securities' Dan Ives said that the quarter's results were "stellar" and discounted the fall in Tesla's share price as a "knee-jerk reaction." As the decline in Tesla's share price began after its earnings call, Ives told Yahoo Finance, "We're only in the second inning of what's going to be a $5 trillion green tidal wave … the stock's selling off here we just view it as an opportunity to own this more."

Wells Fargo analyst Colin Langan has a Hold rating on Tesla stock and raised his price target to $910 from $860. He revised his estimate of his earnings to $7.85 per share from $6.90 per share after the earnings call.

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  1. "Tesla Earnings Transcript."

  2. Morningstar. "Tesla Quote."

  3. CNBC. "Tesla Is a Cash Machine but Its Next Steps Are Raising Eyebrows."

  4. Yahoo Finance. "Tesla Taking Part in a $5 trillion Green Tidal Wave: Dan Ives."

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