Elon Musk at the Tesla China-made Model 3 delivery ceremony in Shanghai on January 7 2020. Picture: STR AFP/CHINA OUT
Elon Musk at the Tesla China-made Model 3 delivery ceremony in Shanghai on January 7 2020. Picture: STR AFP/CHINA OUT

London — Tesla shares extended their meteoric gains in US pre-market trading as even the most pessimistic analysts struggled to find faults in the electric vehicle (EV) maker’s quarterly earnings report.

It was a “home-run quarter” for Elon Musk’s firm, according to Wedbush’s Dan Ives, as the company reinstated its original delivery target of 500,000 units in fiscal 2020 and reported its fourth consecutive profit. Cowen’s Jeffrey Osborne upgraded his rating to market perform, removing the underperform recommendation he has held since initiating coverage of the stock in 2016.

The quarter was marked by a “step change” in China, where Shanghai accounted for a sharply higher proportion of Tesla’s global production and deliveries, according to Morgan Stanley’s Adam Jonas. Cash flow was also impressive, he said.

“Bears really would have to nit pick at the release to construct a materially negative narrative,” Jonas wrote in a note.

Tesla shares rose 5.2% in pre-market trading. The stock has almost quadrupled in 2020 and is up more than six-fold in the past 12 months.

Here’s a summary of what analysts have to say:

Cowen, Jeffrey Osborne

  • Upgrades to market perform from underperform
  • Price target to $1,100 from $300

Execution on margins, cost control, lower capital spending and a faster ramp-up of factories and new vehicles have exceeded expectations. New factories, vehicle platforms and in-house batteries seen driving sentiment towards the stock.

Goldman Sachs, Mark Delaney

  • Neutral

Tesla has met the most important criteria investors were looking for: profit for the second quarter and commentary that 500,000 deliveries are achievable for the year.

The positive free cash-flow result for the second quarter was an “upside surprise”.

Compared with Goldman estimates, the primary driver of profit upside was from regulatory credit sales and the release of deferred revenue.

Loup Ventures, Gene Munster

The most important takeaway from the earnings report is that Tesla is “following Amazon’s playbook” by building a cycle of re-investing profit to drive growth, scale and innovation.

It will be difficult for peers to build a vehicle that is feature  and price competitive with Tesla, as the company has about 80% of the EV share in the US.

Sees Tesla adding energy as a central theme and this is where the long-term value will lie.

Wedbush, Daniel Ives

  • Neutral, price target $1,800 from $1,250

Second-quarter results were much better than expected and Elon Musk delivered a “home-run quarter” that defied sceptics.

EV demand in China is accelerating and Tesla is competing with domestic and international competitors for market share.

China growth was a major source of strength in the second quarter and the growth story in the country is “worth $400 in a bull case” to Tesla, with EV penetration set to rise.

Morgan Stanley, Adam Jonas

  • Underweight, price target $740

Bears would have to “nit pick” at the results to find negatives.

Highlights include China production being positive for margins and outstanding free cash-flow management.

Positive results show that comparisons between high-scale EV companies and established internal combustion engines are becoming less meaningful.


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