Case Study: What Credible analysts are saying on Tesla (TSLA) stock
Key Points
Performance
Tesla (TSLA) just had its best week since 2013, up approximately 33%. On a year-to-date basis, JPM shares are now up by 64.57%. This compares favorably to the S&P 500, which is up by approximately 6.44% during 2023 thus far.
Event & Impact
Tesla announced Q4 earnings on Wednesday, posting top-line results which met Wall Street’s estimates and a bottom-line figure which beat consensus. During its Q4 report, TSLA posted $24.32 billion, which was in-line with Wall Street consensus, and $1.19/share in non-GAAP earnings, which beat Wall Street’s estimate by $0.08/share.
Noteworthy News:
Tesla maintained its former growth guidance and reassured investors, calling for strong profit margins in the face of recent price cuts.
Nobias Insights
94% of recent articles published by credible authors focused on TSLA shares offer a “Bearish” bias. 2 out of the 4 credible credible Wall Street analysts who cover Tesla believe shares are likely to fall in value. The average price target being applied to TSLA by these credible analysts is $138.67 which implies downside potential of approximately 22% relative to the stock’s current share price of $177.90.
Bullish Take Luke Lango, a Nobias 4-star rated author, said, “Tesla is sprinting into 2023 with better demand than ever, along with relatively stable profit margins. That’s a winning combination.”
Bearish Take 4-star rated Nobias author, Billy Duberstein, said, “Currently, shares go for 43 times trailing non-GAAP earnings per share (EPS) and 73 times trailing free cash flow.”
TSLA Jan 2023
CNBC just reported that Tesla shares had their best week since 2013. Tesla shares were up 11.00% on Friday, pushing their 5-day performance up to 33%. This rally was largely bolstered by the company’s Q4 earnings report which was posted on Wednesday, January 25th. In that report, TSLA posted $24.32 billion, which was in-line with Wall Street consensus, and $1.19/share in non-GAAP earnings, which beat Wall Street’s estimate by $0.08/share. Prior to this rally, TSLA was in the doghouse, falling from its 52-week high of $384.29 to recent lows of $101.81. Even after Tesla’s recent rally, shares are down by 35.6% during the trailing twelve month period.
Bullish Nobias Credible Analysts Opinions:
Luke Lango, a Nobias 4-star rated author, covered Tesla’s recent share price rally in an article that he published at Business Insider. He started, highlighting the negative sentiment surrounding the stock prior to its Q4 report.
Lango said, “CEO Elon Musk was dumping billions’ worth of shares. The company was cutting prices on all its cars. Delivery growth was significantly slowing into the end of 2022. Political issues were plaguing the brand.” “It seemed like everything was going wrong for Tesla all at once. As a result, pretty much everyone was saying to sell Tesla stock,” he wrote. But, “not us” Lango continued, highlighting a call from a month ago which called TSLA shares “oversold and undervalued”.
Lango also noted that he’s not interested in taking profits after the stock’s 40%+ rally. Why is he so bullish? Not because of TSLA’s Q4 results. Lango wrote, “The report itself wasn’t great. Delivery growth continued to slow last quarter. Average automobile sales price slipped. Gross margins contracted. Operating margins dropped sequentially. Free cash flow production crashed.”
“Honestly,” he said, “the numbers were pretty bad.” But, management’s commentary during the conference call was “great” he said. Lango stated, “Last night, Tesla showed us that both itself and the entire EV industry are due for a blockbuster 2023.”
With specific regard to the conference call, he noted, “Elon Musk and company essentially said that the worst of Tesla’s growth struggles are behind it and that the company’s growth profile should meaningfully re-accelerate in 2023 and ‘24. “
“According to Musk,” Lango wrote, “the company is seeing a record number of orders so far in January 2023, with demand outnumbering production by 2-to-1.” Furthermore, he continued, “Management specifically said on the conference call that it is their expectation that Tesla’s automotive gross margins will exceed consensus expectations in 2023.” He concluded, “Tesla is sprinting into 2023 with better demand than ever, along with relatively stable profit margins. That’s a winning combination.”
“Overall, then, it actually looks like that – despite all the negative press surrounding Tesla over the past few weeks – the EV titan is setting up for a record year in 2023,” said Lango, before proclaiming that he expects the stock’s rally to continue.
Poonam A. Arora, a Nobias 4-star rated author, broke down Tesla’s Q4 results in an article that she published at Seeking Alpha this week. Arora highlight the stock’s quarterly results, stating: “For the quarter, revenues were ~$21.3 billion (+33% compared to F4Q2021), and earnings per share came in at $1.07 (versus $0.68 during the same quarter last year). On a year-over-year basis, gross margins declined by 360 bps to 23.8%, and operating margins expanded by 129 bps to 16%. Net income for F4Q2022 was ~$3.69 billion, reflecting an uptrend of 59%, over the previous year’s same quarter.
During the period, the firm generated operating cash flows of $14.7 billion and free cash flows of $1.42 billion. At the end of F4Q2022, the company had a cash and cash equivalents balance of ~$22.2 billion and long-term debt of ~$1.6 billion, on its balance sheet.
For FY2022, revenues were ~$71.5 billion (+51 % compared to FY2021), and earnings per share came in at $3.62 (versus $1.63 during the previous year). On a year-over-year basis, gross margins expanded by 32 bps to 25.6%, and operating margins escalated by 464 bps to 16.8%. Net income for the period was ~$12.6 billion, reflecting an uptrend of 128% over the prior year.” She also touched upon TSLA’s price cuts, which have been in the headlines as of late, highlighting the company’s relatively attractive margin profile (when compared to peers in the automotive industry).
Arora said, “Competitively, the price cuts, set Tesla up to benefit, as the company’s margins are considerably higher than that of its peer group. Specifically, during F3Q2022, Tesla’s gross profit/car was $15,653, while that of General Motors (GM) was $9,969, BYD Company Limited (OTCPK:BYDDF) was $5,456, and Ford’s (F) was $3,115. During the same period, Tesla’s net profit/car was $9,574, compared to GM’s $2,150, BYD’s $1,575, and F’s $927.”
“In that regard,” she continued, “it is noteworthy that during 2022, Tesla accounted for ~65% of total revenues associated with the EV industry, with F at ~7.6%, and GM at ~3.5%, far behind. In addition, although the Model Y at $52,990 is still priced at a premium to F’s best selling EV Model, the Mach-E, it is priced below the firm’s higher-end EV Models. With respect to GM’s EV’s, Model Y’s base price is ~$10,000 below that of the company’s similarly sized EV SUV, the Cadillac Lyriq.”
Arora concluded, “The first mover advantage Tesla secured, sustained, and built on, almost ensures its dominance over the EV industry, through the course of its life cycle.” Lastly, she stated, “At current levels, Tesla’s stock represents a significant opportunity to generate massive returns on capital, over the long term.”
Bearish Nobias Credible Analysts Opinions:
4-star rated Nobias author, Billy Duberstein, published a report at the Motley Fool this week which highlighted the pros and cons of Tesla stock after its 2023 year-to-date rally. Duberstein also put a spotlight on TSLA’s recent price cuts, then went on to highlight the company’s production goals for 2023. He said, “Musk noted that the price cuts had sparked demand, with January orders now double Tesla's rate of production.”
“Of note,” Duberstein continued, “Musk thinks Tesla can produce around two million vehicles this year, above the company's "conservative" forecast for 1.8 million.” “For reference,” he said, “Tesla did just over 1.3 million deliveries in 2022.”
Despite these strong production numbers, Duberstein noted that TSLA shares trade with a high valuation premium. He said, “Currently, shares go for 43 times trailing non-GAAP earnings per share (EPS) and 73 times trailing free cash flow.”
Next, he asked the question,“Now what?” He answered, ”Whether or not Tesla can continue its recent run depends on a few things that will affect growth in 2023.” With regard to what investors should look for, he said, “First, the health of the global economy and whether we will see a recession or not, and if so, how bad it will be.”
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
“Second,” Duberstein said, “ investors should monitor how consumers feel about the Tesla brand, as Elon Musk has become increasingly vocal and polarizing in his political commentary since acquiring Twitter in October.”
“Third,” he concluded, “investors should monitor if the incentives from last year's Inflation Reduction Act spur lots of incremental demand for EVs in 2023, as the incentives just kicked in on January 1.
Overall bias of Nobias Credible Analysts and Bloggers:
While we’ve seen credible authors come out with bullish reports since TSLA’s Q4 earnings were published, 94% of reports published by credible authors recently have expressed bearish opinions.
Furthermore, the average price target currently being attached to TSLA by the credible Wall Street analysts that the Nobias algorithm tracks is $138.67, which implies downside potential of approximately 22% relative to TSLA’s current share price of $177.90.
Disclosure: Nicholas Ward had no TSLA position. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.