Tesla Motors Is Still Rising After Volume Beat

Tesla Motors Is Still Rising After Volume Beat
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Tesla Motors Inc (NASDAQ:TSLA) had a nice surprise for investors earlier this week when it announced that it had beaten the fourth quarter delivery guidance it had provided. The automaker delivered 6,900 units during the quarter, although it guided for slightly under 6,000 Model S sedans. A few days later, shares are still rising, climbing another 4% during the regular trading day today.

Deutsche Bank analyst Dan Galves and his team say they think this week’s announcement will shift sentiment surrounding Tesla Motors Inc (NASDAQ:TSLA) over to the positive after a lengthy period of time with almost no positive catalysts. So far, it appears as if they’re right.

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Tesla sets positive note at Global Auto Conference

The analysts also provided some details on Tesla’s presentation at Deutsche Bank’s Global Auto Conference on Wednesday. They said although the automaker’s presentation was positive, the news about the deliveries overshadowed it. In their estimation, Tesla continues to see more demand than it is capable of producing. As a result, they see the deliveries announcement as being important from the perspective of production, which has been worrying investors since the company’s last earnings report. Tesla reported that they began this year producing 600 cars a week, which would be 30,000 cars on an annualized basis. That’s about what Deutsche Bank is estimating that Tesla Motors Inc (NASDAQ:TSLA) will produce this year. They think the automaker will continue to increase production sequentially on a better than expected basis through the end of the year.

How many cars will Tesla deliver this quarter?

The Deutsche Bank analysts said they’ve noticed that Tesla tends to increase its production by about 50 units per week each quarter. They said starting out making 600 cars a week suggests that the automaker will indeed hit its target of 800 cars per week by the end of this year. In fact, Galves and his team think Tesla will surprise again on the number of deliveries this year. They noted that Tesla Motors Inc (NASDAQ:TSLA) is seeing a bit of improvement in the area of battery cell supply, which was the automaker’s number one concern in its last earnings report. Panasonic is in the process of re-commissioning a plant which had been shuttered. In light of this, he thinks Tesla Motors Inc (NASDAQ:TSLA) will deliver at least 32,000 cars this year, if not as many as 34,000 cars by the end of the year. They note that at an average of 700 cars a week, Tesla would produce 35,000 cars this year. Assuming 1,000 of them are in transit at the end of the year, they get their 34,000 vehicle estimate.

Driving upside to Tesla’s numbers

For every 1,000 units of upside, the Deutsche Bank team believes Tesla will see at least $35 million of EBIT upside and between 19 cents and 23 cents per share in earnings upside. Of course that depends on the tax rate though. For the fourth quarter, they are estimating that Tesla Motors Inc (NASDAQ:TSLA)’s incremental 700 to 750 units could generate an extra 20 cents per share in earnings, compared to their 19 cents per share estimate. They also see a 27% gross margin as being possible, compared to their current estimate of 26%. The Deutsche Bank team also reported a few other highlights from Tesla Motors Inc (NASDAQ:TSLA)’s presentation this week. The automaker said it still sees plenty of room for volume growth in the U.S. since there are still many key markets which lack service and distribution points. In addition, Tesla Motors Inc (NASDAQ:TSLA) reports that their customer surveys indicate that 80% of Model S owners use it as their prime vehicle. Tesla also said they believe the Generation III mass market vehicle will have “category leading margins” and that the cost structure for the vehicle will be in place without any more technological breakthroughs being needed. Deutsche Bank has a Buy rating and $200 per share price target on Tesla.

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