Tesla Reports Record Net Income In 1Q; Street Says Hold

Tesla posted non-GAAP net income of more than $1 billion for the first time in its history in 1Q. The electric car maker reported a 74% year-on-year increase in sales to $10.4 billion, slightly missing analysts’ expectations of $10.48 billion, while non-GAAP adjusted diluted EPS of $0.93 per share came in ahead of consensus estimates of $0.75 per share.

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Tesla’s (TSLA) CEO and Product Architect Elon Musk said at the company’s earnings call, “So Q1 2021 was a record quarter on many levels. Tesla achieved record production, deliveries and surpassed $1 billion in non-GAAP net income for the first time.”

Musk added, “We’re used to seeing a reduction in demand in the first quarter and we saw an increase in demand that exceeded the normal seasonal reduction in demand in Q1. So Model 3 became the best-selling midsized premier sedan in the world.”

The company’s rise in sales in the first quarter was driven by higher vehicle deliveries, despite instability in the supply chain and the seasonality factor. Vehicle ASP (average selling price) fell 13% year-on-year as product updates caused a reduction in deliveries of Tesla’s X and S models, while vehicles made in China with lower ASP comprised a higher percentage of car deliveries.

TSLA said that it expects to scale up its manufacturing capacity and achieve 50% annual growth in vehicle deliveries over “a multi-year horizon”. The company is currently in the process of building capacity for Model Y at its Gigafactories in Berlin and Texas, and expects to start production and deliveries of the Model Y this year. (See Tesla stock analysis on TipRanks)

Following the earnings, Wedbush analyst Daniel Ives reiterated a Buy and a price target of $1,000 on the stock. Ives said in a note to investors, “After the bell Tesla reported its 1Q results that we would characterize as a strong print for Musk & Co. as total revenues were slightly below bullish expectations coming in at $10.39 billion vs. the Street’s $10.48 billion estimate…”

“GAAP gross margin was 21.3% which was slightly ahead of Street expectations of 21.0% (with automotive gross margin of 26.5% vs. consensus of 24.3% which will be a highlight of the bulls); the all-important Automotive GM [gross margin] ex-credits was 22.0%, vs. the year ago period of 20.0%…In a nutshell, we believe the GM performance was a standout relative to Street fears heading into the print,” Ives added.

Overall, the Street is sidelined on TSLA stock with a Hold consensus rating based on 11 Buys, 8 Holds, and 8 Sells. The average analyst price target of $682.13 implies downside potential of about 7.6% to current levels.