Charged: Tesla rises after quarterly results on earnings growth

Institutional investors and professional traders rely on The Fly to keep up-to-the-second on breaking news in the electric vehicle and clean energy space, as well as which stocks in these sectors that the best analysts on Wall Street are saying to buy and sell.

From the hotly-debated high-flier Tesla (TSLA), Wall Street’s newest darling Rivian (RIVN), traditional-stalwarts turned EV-upstarts GM (GM) and Ford (F) to the numerous SPAC-deal makers that have come public in this red-hot space, The Fly has you covered with “Charged,” a weekly recap of the top stories and expert calls in the sector.

RESULTS: Tesla reported quarterly results on Wednesday, with Q3 adjusted EPS at 72c, which was better than the expected 58c, and Q3 revenue at $25.18B, just shy of consensus $25.37B. The company also reported Q3 gross margin 19.8% and free cash flow $2.74B, and said it sees 20%-30% vehicle sales growth for 2025.

Following the quarterly results, several Wall Street firms increased their price targets on the shares. Canaccord was one of those, raising the firm’s price target on Tesla to $278 from $254 and keeping a Buy rating on the shares. The firm said the quarter was truly solid overall, margins were good much better than expected and a standout for the quarter. Tesla maintained their target for 2024 volume growth, reiterated their promise to offer new vehicles, and introduced preliminary unit volume growth for 2025.

JPMorgan also raised the firm’s price target on Tesla to $135 from $130 but kept an Underweight rating on the shares. Investors expected Tesla to grow earnings year-over-year for the first time in Q3 after six straight quarters of declines, the magnitude of improvement likely caught them by surprise, with the company generating $2.7B of operating profit, the firm tells investors in a research note. JPMorgan expects this “surprising earnings beat to power a strong positive reaction” in Tesla shares. However, at the same time JPMorgan sees several potentially unsustainable drivers of Q3’s better earnings and cash flow performance, including near-record sales of 100% margin regulatory credits and atypically large working capital benefits.

Click here to check out Tesla’s recent Media Buzz Sentiment as measured by TipRanks.

POWERED LIFTS FINAL RULE: The Federal Aviation Administration, or FAA, said it is “ready for powered lift, which will be the first completely new category of civil aircraft since helicopters were introduced in the 1940s. Powered lift operations include air taxis, cargo delivery and a variety of operations within urban and rural areas.” The agency has issued a final rule for the qualifications and training that instructors and pilots must have to fly aircraft in this “powered-lift” category, which have characteristics of both airplanes and helicopters. The rule also addresses their operational requirements, including minimum safe altitudes and required visibility. The rule is the final piece in the puzzle for safely introducing these aircraft in the near term. The rule makes changes to numerous existing regulations and establishes a Special Federal Aviation Regulation with new requirements to facilitate instructor and pilot certification and training; applies helicopter operating requirements to some phases of flight and adopts a performance-based approach to certain operating rules; allows pilots to train in powered-lift with a single set of flight controls; legacy rules require two flight controls – one for the student and one for the instructor.

Commenting on the news, Canaccord says the decision to provide the final requirements in advance of the 2024 election is broadly positive for the industry, given that there could be some internal staff turnover during the post-election transition period should a second Trump Administration return to power. The firm notes the final rule as issued by the FAA provides some compromise for electric vertical take-off and landing operators on the fuel/battery reserve requirements relative to what is required for helicopters today. The completion of the final rule for powered lift aircraft is broadly positive for the air taxi industry, the firm contends. Canaccord has Buy ratings on Archer Aviation (ACHR), Eve Holding (EVEX), Vertical Aerospace (EVTL) and Joby Aviation (JOBY) and a Hold rating on Lilium (LILM).

LACKLUSTER Q3: Guggenheim downgraded NextEra Energy Partners (NEP) to Neutral from Buy with a price target of $22, down from $37. The company reported “lackluster” Q3 earnings and the alternatives for convertible equity portfolio financing resolution “have clearly narrowed,” the firm tells investors in a research note. Guggenheim says the lack of capital market reprieves leaves NextEra Energy Partners disadvantaged as a yield-tied stock. Management commentary around a lack of private market backstops and public equity valuation removes opportunities for accretive growth financing, adds the firm.

This comes only days after JPMorgan upgraded NextEra Energy Partners to Neutral from Underweight with a price target of $22, down from $25. The company reported Q3 results below expectations primarily owing to lower wind resource, the firm notes. More importantly, the firm says the company announced that it intends to provide an update to investors by no later than the Q4 earnings call regarding the strategic review of its long-term convertible equity portfolio financing obligations and cost of capital. JPMorgan believes a dropdown announcement, in conjunction with a distribution reset, could be a catalyst for the stock and provide increased growth visibility into fiscal 2026 and beyond.

RATING CUTS AFTER RESULTS: Janney Montgomery Scott downgraded Enphase Energy (ENPH) to Neutral from Buy with a fair value estimate of $83, down from $119, after the company’s Q4 revenue guidance of $360M-$400M came in “well below” the previously discussed second half run-rate revenue target of $450M-$500M. The firm is “reluctantly cutting” its rating to Neutral, as it “feels like the final capitulation regarding forward estimates, margins, and free cash flow remain supportive” and that new battery storage products in Q1 of 2025 should be margin accretive. However, Janney also acknowledges that the company lacks near-term catalysts before year-end, that European growth has “evaporated,” and that visibility on a new battery product might not emerge until Q1 2025 results.

Meanwhile, Guggenheim downgraded Enphase Energy “back” to Sell from Neutral with a $73 price target following the release of the company’s Q3 report. Enphase’s Q3 results and outlook underscore the company’s competitive strength in the U.S. market, but also its “significant” challenges in Europe, the firm tells investors. While stating that it is true that Tesla poses a growing threat for the storage-attached segment of Enphase’s business, and this is already showing up in results, Guggenheim argues that “growing disarray” at SolarEdge (SEDG) and a lack of progress from aspiring entrants like Generac (GNRC) leaves Enphase “plenty of room to operate” in the U.S.

SOMEWHAT OF A RENAISSANCE: GLJ Research upgraded Sunrun (RUN) to Hold from Sell ahead of the Q3 report. The firm believes being short the stock into earnings “carries with it quite a bit of risk over the near-term.” GLJ’s long-term view on Sunrun’s business being a “cash-incinerating science project is unchanged.” However, due to the recent trend among utilities, which involves increasing the price of electricity they charge customers, and Sunrun’s new focus of offering leases below the price of power customers pay, “there has been somewhat of a renaissance” in the U.S. solar power purchase agreement markets, contends the firm.