Wall Street Reacts To Tesla’s Blowout Earnings

Unlike yesterday’s ritualistic(and symbolic) suicide by dozens of sellside analysts who lost all credibility holding on to a buy rating into the second consecutive NFLX implosion, this morning’s Tesla post-mortem is a decidedly more pleasant affair for the sellside: Tesla stock is 8% higher in premarket trading, with electric-vehicle peers also rising, after TSLA posted record first-quarter profit that beat estimates. With a few notable exceptions, Wall Street firms praised the company’s robust demand and confident outlook despite supply-chain issues.

Analyst Commentary

Wells Fargo, Colin Langan (equal weight, PT $910)

“Once again, higher pricing and leverage of labor and overhead costs likely helped offset the underlying material cost inflation”
Also notes strong delivery growth and a favorable pricing environment

Jefferies, Philippe Houchois (buy, PT $1,250)

While guidance was unchanged, Houchois is more confident
Equipment capacity, pace of new manufacturing technologies and supply chains remain the limiting factors in 2022, he writes

Wedbush, Dan Ives (outperform, PT $1,400)

With supply-chain issues still an overhang on the auto sector and global logistical issues, the “Cinderella-like” delivery numbers speaks to an EV demand trajectory that looks quite robust for Tesla
In terms of guidance, not surprisingly Tesla stuck to its forecast for 50% average annual growth in deliveries, although clearly supply chain issues have become a limiting factor, Ives writes

BofA, John Murphy (neutral, PT $1,300)

Despite the solid 1Q performance, we have trepidation that TSLA stock may already be “priced for perfection”
Near-term earnings beats may be insufficient to get bulls incrementally positive on the stock

Citi (sell, PT $375)

While management confirmed that 2Q will be impacted by the Shanghai shutdown and Austin/Berlin ramp, the overall 2022 outlook was encouraging
Citi says it agrees with Tesla’s view of the broader AV opportunity as an area where value creation opportunities exist

Piper Sandler, Alexander Potter (overweight, PT $1,260)

There’s uncertainty in 2H, and 2022 deliveries may be impacted by Covid lockdowns in China, but so far, Tesla has successfully relied upon its operational prowess to navigate these hurdles while generating lots of cash
If future results are weakened by unavoidable macro shocks, the impact will likely be transitory

Hargreaves Lansdown, Laura Hoy

While the costs to setup are enormous, once they’re covered, a greater percentage of each vehicle drops straight through to profit, Hoy notes
Tesla’s performance is genuinely impressive, but the stock is priced to reflect this so it takes a lot to move the needle in a positive direction

Not everyone was cheerful, however, and as usual, GLJ’s Gordon Johnson accused Musk of lying about going “ex-growth”:

“We believe E. Musk saw the move in Netflix’s stock ex-growth in yesterday’s trading session, and wanted to paint a picture that, no matter what, TSLA will not go ex-growth, on a unit sales basis, in 2Q22 (we believe his forecast here will prove [very] wrong).”
“In short, when adjusting for : (a) $288M in one-time regulatory cafe credits “gifted” to TSLA by NHTSA four days prior to quarter end, (b) $377M in “magical” cost reductions (TSLA’s OPEX fell from $2.234B to $1.857B, despite 40yr high inflation, two new plants ramping, and flat unit production – we believe a lot of this had to do with capitalized TX/Berlin costs, as well as lower SBC for E. Musk), and (c) $497M in incremental non-current other assets (which, based on TSLA’s 10-K filing, consists of pure margin benefit long-term government rebates), TSLA’s $2.87/shr in GAAP EPS was helped by ~$1.00/shr in non-core items.”