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Tesla Inc. shares soared 11% after the carmaker reported record revenue that beat estimates and projected it will deliver at least half a million vehicles this year, leaving bearish analysts with few negatives to cling to.
Cash flow was also “very strong,” at more than $1 billion in the fourth quarter, Morgan Stanley’s Adam Jonas wrote in a note to clients. There’s “really nothing here for the bears to highlight,” added the analyst, who cut his rating on the stock to underperform just two weeks ago.
Jonas is among 18 analysts surveyed that have a sell-equivalent rating on Tesla, twice the amount that rate the shares a buy. While short interest has declined as the stock rallied in recent months, it remains at about 11% of the free float, according to IHS Markit data.
Tesla has been on a dizzying rally so far this year, adding 39% in value through Wednesday and sending analysts scrambling to boost their price targets. Even still, shares took off after the earnings beat with impressive speed, jumping nearly $80 apiece in less than an hour.
The stock surged as much as 12% to $650.88 in New York, making it the best performer on the Nasdaq 100 Stock Index over the past twelve months.
Here’s what else analysts had to say:
Wedbush Dan Ives
Neutral, price target $550
“We would characterize the fundamental performance as impressive, with clear momentum looking ahead as a global inflection in electric vehicle demand appears on the horizon.”
Results indicate lower costs, more production efficiency, and “extremely impressive” automotive gross margins
Bulls may also focus on the aggressive trajectory of Giga 3 production and demand out of Shanghai. Hitting the important 500,000 delivery threshold for full-year 2020 is well within reach as now, based on Wedbush’s Chinese demand scenario analysis.
RBC, Joseph Spak
Underperform, price target raised to $530 from $315
Admits to being “misguided” in some assumptions, and thus, significantly raises his estimates post-results. However, on a reasonable base case, still believes Tesla is overvalued.
Notes that, despite the “slight” revenue increase, total gross profit and automotive gross profit declined year-on-year.
But “if bulls keep dreaming the dream,” there’s room to run to RBC’s $928 a share upside case.
Jefferies, Philippe Houchois
Buy, price target $600
Quarterly earnings were as expected, but free cash flow was two-times consensus. With net debt also lower and 2020 volume guidance above 500,000 there’s room for consensus to move higher.
Notes Chief Executive Officer Elon Musk dismissed raising capital as unnecessary, arguing Tesla is not in any way holding back investment.
However, lack of capital expenditure guidance is disappointing, while the unfolding coronavirus creates some uncertainty, with a 1-2 week mandated shutdown in Shanghai.
Citigroup, Itay Michaeli
Sell, price target $222
Results are another positive, if not impressive, step forward. However, given current market capitalization, don’t see many incrementally supportive data points.
In fact, see some negatives regarding near-term full self-driving capabilities. Magnitude of the beat and underlying metrics was underwhelming, while 2020 delivery guidance could be viewed as light versus the guidance given at first quarter 2019.
Cautious on chasing the stock amid a number of flaws in the bull case regarding North American demand and Tesla’s automated vehicles positioning.
Canaccord Genuity, Jed Dorsheimer
Buy, price target $750 from $515
“Essentially flat gross margins compared to the prior quarter were a meaningful feat given the ramp associated with Gigafactory Shanghai moving to begin production, resulting in an operating margin of 4.9%, and we expect to see that number improve as deliveries of Chinese Model 3s begin.”
“Given the numerous positive data points that were discussed and the cornerstone of continued profitability and free cash flow generation, we view the company as solidly positioned as the leader of the electric vehicle revolution.”
(Updates shares in fifth paragraph, adds chart and Canaccord comments.)
–With assistance from Sam Unsted, James Cone and Lisa Pham.
To contact the editors responsible for this story: Beth Mellor at [email protected], Jon Menon