Despite the myriad issues Tesla (TSLA) faced in Q2, the EV leader still managed to deliver a better-than-expected earnings report.
The company generated revenue of $16.934 billion, just a touch above the Street’s call for $16.628 billion. There was a more impressive beat on the bottom-line, as diluted EPS of $2.27 came in some way above the $1.78 analysts had predicted.
One area of concern, however, was noted in the margin profile, which suffered at the hands of rising inflation and stiff competition for EV parts. Margins contracted to 27.9%, below the impressive 32.9% reported in Q1 and the 28.4% delivered during the same period last year. The margin drop was linked to the costs associated with the ramping of the new facilities in Austin and Berlin.
CEO Elon Musk said that in June the Berlin factory’s output reached over 1,000 cars a week, and the Austin factory is expected to be able to attain the same amount over the coming months. By the end of this year, Tesla is eyeing the production of 40,000 units a week, a 25% increase on the recent peak of around 30,000 vehicles a week.
Surveying the results, Morgan Stanley’s Adam Jonas notes that demand is still outstripping supply. Although with the “new challenges” on account of the ramping of production – especially in Berlin – the analyst is readying for further “near-term margin headwinds.”
Where the stock is concerned, the analyst remains “constructive,” but thinks it will take more to move the needle significantly in either direction.
“Hard to see what really rocks the boat on consensus on Tesla until the company posts a more significant margin miss and/or we see evidence of new growth/margin profile from the ramp of Berlin and Austin,” the analyst said. “In the interim, we have a stock trading at approx20x EBITDA and 35x our current FY25 forecasts… multiples that many auto investors are likely to find unacceptably high but tech investors may find attractive…”
Jonas seems to find those multiples acceptable. The analyst reiterated an Overweight (i.e., Buy) rating along with a $1,150 price target, implying room for share appreciation of 41% over the coming year. (To watch Jonas’s track record, click here)
Most are backing TSLA’s continued success, but there are voices heeding caution; the stock’s Moderate Buy consensus rating is based on 17 Buys, 5 Holds and 7 Sells. Going by the $886.04 average target, shares are expected to climb a modest 9% over the one-year timeframe. (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.
