Is it time to buy or sell Tesla stock? Analysts comment on earnings report

Charlie Taylor


Some analysts appear to be relieved following the release of the electric car maker’s quarterly results. Tesla reported its earnings per share on Wednesday, and they beat analysts’ expectations, with revenue growing 42% from a year earlier. On the other hand, automotive margins declined due to inflation and increased competition for components for electric vehicles. Analysts and investors were worried about Tesla’s second-quarter results as the company faced a myriad of production issues at its factories in Berlin, Texas and Shanghai. In addition, Tesla’s bitcoin holdings raised concern that the electric car maker would have to watch out for the currency’s sharp decline during the quarter.
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The mixed results were enough to allay analysts’ concerns, at least in the short term. For Jefferies’ Philippe Houchois, all the key P&L numbers were a positive surprise with previous price increases, fueled by Average Revenue per Users. In a note titled “Relief Considering What Could Go Wrong in Q2,” Houchios maintained his buy rating and $1,050 target price at the automaker. With the second quarter out of the way, some analysts think Tesla is poised for a stronger second half of 2022. Ben Kallo, an analyst at investment bank Baird, said he expects superior performance as “June was Tesla’s highest production month, based on record production in Fremont, Shanghai returning, and two new factories.” He also characterized the company’s second quarter report as “better than expected.” However, some analysts said they do not expect any major movement in Tesla’s share price in the short term. Morgan Stanley’s Adam Jonas wrote in a note that “it’s hard to see what really shakes the consensus on Tesla until the company demonstrates a more significant lack of margin and/or we see evidence of a new growth profile from Berlin and Austin. ” Until then, Jonas sees the stock price as too high for auto investors, but potentially attractive for tech investors. It maintained its outperformance rating on the stock, and its price target of $1,150. John Murphy of Bank of America also sees the shares in a holding pattern in the short term as, despite the “relatively good performance of the second quarter, we are concerned that Tesla shares may already be priced perfect (or at least a hyperbolic growth price), so short-term gains may be insufficient.” Murphy believes Tesla’s performance will be as expected, and has given a price target of $950 for the stock. Jeffrey Osborne of investment bank Cowen is also looking for catalysts for any significant hit to equities as he says equities have limited reach “until it becomes clear that Texas and Berlin are well positioned.” Osborne further added that Tesla’s 50% growth guidance for the year seems a bit “aggressive,” but it raised its price target from $700 to $733. Tesla’s valuation is also well above that of the broader market – even after having dropped nearly 30% for the year. Because of this, some analysts see no need to change their views on Tesla, even after the company’s quarterly report. Bernstein’s Toni Sacconaghi wrote that while the bank recognizes Tesla’s innovation and financial success, it finds it difficult to “justify the company’s appreciation.” “The company’s valuation is higher than that of all the other major automakers combined, and appears to imply enormous volume and industry-leading profitability. We believe risk/return at current levels is not attractive to long-term investors.” Because of that, Sacconaghi maintained its underperforming rating and a $450 price target for Tesla. At the time of writing, the appreciation of the shares of Tesla (TSLA) it was around $784.
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