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Tesla (TSLA) has made a habit of beating Street expectations in recent quarters, but with the EV leader set to announce 2Q22 deliveries and production figures this weekend, Deutsche Bank’s Emmanuel Rosner thinks a surprise to the downside is on the way.
Reflecting the extended Covid-19-related shutdowns and logistical challenges in the Shanghai plant, Rosner now expects Tesla to deliver 245,000 units, compared to 310,000 beforehand. This amounts to a 22% year-over-year uptick but a 21% sequential drop and also below Wall Street’s forecast of 287,000 units.
On the Q1 earnings call, CEO Elon Musk called for “sequentially flat deliveries,” however, given the subsequent worsening of the situation in China, which only got better in early June, Rosner thinks that kind of performance is unlikely.
As a result, Rosner has also reduced estimates for Q2. His revenue forecast drops from $19.2 billion to $15.5 billion, and due to the “late impact of the prolonged Shanghai shutdown as well as new factory cost ramp” in the quarter, automotive gross margin is lowered from 28.7% to 26.4%. This leads to the EPS estimate going from the prior $2.71 to $1.66.
The Street has higher expectations, calling for revenue of $17.7 billion and EPS of $2.04, but Rosner is of the mind the recent conditions in China have yet to be properly factored in.
It’s not all doom and gloom, though. “Beyond the quarter,” says Rosner, “we remain impressed with Tesla’s pricing power and operational execution in the face of large industry supply-chain challenges and note that Q2 should be the trough of the year.”
Even though the Shanghai facility will for the most part be closed in July for ~2 weeks of upgrades, this is ultimately done so the company will be able to hit the “ambitious” weekly production target of 22,000 units (amounting to an annual run-rate of 1.1 million units). Additionally, 2H volume should get a boost from the start of deliveries at the Berlin and Texas facilities.
All in all, Rosner rates Tesla shares a Buy, while slightly reducing the price target from $1,250 to $1,125. What’s in it now for investors? 64% upside potential from current levels. (To watch Rosner’s track record, click here)
Tesla elicits a wide spectrum of opinions on Wall Street; based on 16 Buys, 8 Holds and 6 Sells, the analyst consensus rates this stock a Moderate Buy. Considering the average price target currently stands at $899.86, the shares are expected to add ~31% in the year ahead. (See Tesla stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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