Tesla Inc.’s (TSLA) analysts have been turning more bullish in recent weeks despite the latest news that Elon Musk is looking to take the company private for $420 per share. Since the electric automaker reported results on August 1, analysts have been aggressively upping their earnings estimates for the company, taking forecasts for next year up by more than 68%. This marks an incredible achievement for the company after years of significant losses. (For more, see also: The Future of Tesla.)
The bullish optimism comes as the company continues to ramp-up production of its new 4-door electric sedan, the Model 3. The Bloomberg Model 3 tracker now estimates Tesla is producing more than 5,800 Model 3's per week. Should analysts’ earnings estimates prove to be correct, it could make Elon Musk's ambitions of taking Tesla private a success. It would give Tesla the profits and the ability to raise further financing to continue to grow.
Improving Forecasts for 2018
Since the second-quarter results on August 1, analysts have narrowed their losses for the company in 2018 to $5.85 from prior estimates calling for a loss of $6.79. Revenue estimates for the full-year also have been revised higher by 4% and are now seen rising by nearly 74% versus last year to $20.5 billion, from a prior view of $19.5 billion.
Big Jump in 2019
The 2019 earnings estimates have also increased since the beginning of August. Analysts now forecast earnings to rise by more than 68% to $2.83 from a prior view of $1.73. It is the first time in 2018, analysts have upped their forecast for next year. Revenue estimates have also increased by about 3% and are now forecast to climb by nearly 38% to $28.2 billion.
Price Targets Rise
Despite the improving profits, analysts still think the stock may currently be overvalued, with an average price target of $321.40, about 10% below the current price. But that price target has been substantially raised since the end of July, by nearly 13%. Still, of the 28 analysts covering Tesla, only 32% rate shares a buy or outperform, while 36% rate it an underperform or sell. (For more, see also: The Case Against Tesla.)
It would seem based on estimates that the outlook for Tesla is improving and the company may finally be on the verge of profitability. It might just pay off in a big way should Tesla go private, and the timing may not have been more perfect.
Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.