Tesla stock price target boosted for strong margins

Tesla stock price target boosted for strong margins
Image Courtesy: Sheeraz Raza for ValueWalk, taken at Westfield Mall, London.

Tesla reported a surprise profit and better-than-expected margins for the first quarter. As a result, Canaccord Geunity analysts raised their price target for Tesla Inc (NASDAQ:TSLA) stock from $400 to $650 per share, although they maintained their Hold rating on the shares.

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Q1 2020 hedge fund letters, conferences and more

Tesla margins, profit surprise

The automaker reported earnings of $1.24 per share on $5.99 billion in revenue for the first quarter. Analysts had been expecting a loss of 48 cents per share and $5.6 billion in sales. Canaccord Genuity analyst Jed Dorsheimer noted that Tesla ended the first quarter with $8.1 billion in cash, although it reported -$895 million in free cash flow. The negative cash flow was driven by a $981 million inventory hit due to impacts on delivery late in the quarter due to the coronavirus pandemic.

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Tesla's gross margins remained at 20.6% during the first quarter, indicating that the company continues to improve on an operational basis in recent quarters. Tesla's strong gross margin drove the surprise profit as its cost structure initiatives continue to bear fruit.

Dorsheimer expects the automaker to remain dominant in the EV market and advises investors to look for a better entry point to establish positions or add to current positions.

Elon Musk calls stay-at-home orders "fascist"

Tesla CEO Elon Musk went on a rant during the earnings call this week, blasting government stay-at-home orders as "fascist." He described them as "forcibly imprisoning people in their homes against all their constitutional rights."

He expressed concern about not being able to reopen the Fremont factory. He considers that to be "a serious risk" because the company produces almost all of its cars there and at its Shanghai factory. Initially he said the Fremont factory would remain open despite the stay-at-home order, but county officials ordered it to be closed because it wasn't an essential business. Alameda County, where Tesla's factory is located, extended its stay-at-home order through the end of May.

Musk's rant against the stay-at-home order included a number of expletives as he called it "an outrage" that people should be ordered to stay home. He added that the stay-at-home order "will cause great harm not just to Tesla, but to many companies."

Tesla stock fell by more than 1% during regular trading hours today.

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