Investor's Corner
Tesla gets lower price targets from Jefferies, Morgan Stanley despite 110% YoY growth
Tesla stock (NASDAQ:TSLA) is facing new reservations from Wall Street, with analysts from Jefferies and Morgan Stanley lowering their price targets for the company. This was despite Tesla’s strong year-on-year growth, which saw Q1 2019’s electric car deliveries represent a 110% increase compared to Q1 2018.
In a note on Monday, Philippe Houchois from Jefferies lowered his price target for Tesla stock from $450 to $400. Houchois’ more conservative estimates followed the company’s release of its first-quarter vehicle delivery and production report, which revealed that Tesla delivered ~30% fewer vehicles in Q1 2019 compared to Q4 2018.
“While Q1 disappointed, the critical tests in our view remain demand elasticity in Q2 as lower-priced M3 versions become available and sorting out logistics,” Houchois said.
The Jefferies analyst also noted that Tesla’s recent deal with Fiat Chrysler Automobiles, which will require the legacy automaker to pay Tesla hundreds of millions of euros to allow the electric car maker’s vehicles to be counted as part of its fleet in the region. By doing this, FCA will avoid fines for violating new European Union emission rules. In his note, Houchois stated that the deal could help Tesla generate more income.
“The announcement of an ‘Open Pool’ with FCA (Fiat Chrysler) to reduce calculated CO2 emissions in Europe could generate several $ million of cash income, possibly starting this year. The Tesla equity story remains stressful but we continue to see value in Tesla leading the charge towards attractive and more affordable battery EVs when most competitors continue to enter at the high end where the EV/ICE trade-off is assumed to be highest,” he wrote.
Apart from Houchois, longtime Tesla analyst Adam Jonas of Morgan Stanley also expressed his increasing concerns about Tesla’s funding this year. Similar to his stance in 2018, Jonas estimated that Tesla will likely raise equity in Q3 2019. “The fundamental narrative around Tesla appears more clouded than we have seen in several years. Signs of weakening demand have raised long-standing questions about the company’s ability to fund itself as an independent company,” he said.
Jonas also lowered his price target for Tesla stock from $260 to $240 per share.
While Tesla’s Q1 2019 vehicle delivery and production reports show a steep decline from the company’s figures in Q4 2018, portfolio manager Ken Kam noted that the electric car maker’s year-on-year growth actually paints a far less grim picture. Kam notes that Tesla’s annual growth between Q1 2018 and Q1 2019 is actually 110%, an impressive figure considering that Tesla was dealing with production issues during the first two quarters of the previous year.
Kam also argues that Tesla’s 110% year-over-year increase is a far better result than its peers in the auto industry, with GM announcing a 7% drop from Q1 2018, Ford announcing a decline of 1.6% in the same period, and Fiat Chrysler decreasing by 3% year over year. From this one year perspective, Tesla appears to be one of very few automakers that is actually growing.
As of writing, Tesla stock is trading -0.95% at $272.34 per share.
Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.
Tesla stock (NASDAQ: TSLA) closed at an all-time high on Tuesday, jumping over 3 percent during the day and finishing at $489.88.
The price beats the previous record close, which was $479.86.
Shares have had a crazy year, dipping more than 40 percent from the start of the year. The stock then started to recover once again around late April, when its price started to climb back up from the low $200 level.
This week, Tesla started to climb toward its highest levels ever, as it was revealed on Sunday that the company was testing driverless Robotaxis in Austin. The spike in value pushed the company’s valuation to $1.63 trillion.
Tesla Robotaxi goes driverless as Musk confirms Safety Monitor removal testing
It is the seventh-most valuable company on the market currently, trailing Nvidia, Apple, Alphabet (Google), Microsoft, Amazon, and Meta.
Shares closed up $14.57 today, up over 3 percent.
The stock has gone through a lot this year, as previously mentioned. Shares tumbled in Q1 due to CEO Elon Musk’s involvement with the Department of Government Efficiency (DOGE), which pulled his attention away from his companies and left a major overhang on their valuations.
However, things started to rebound halfway through the year, and as the government started to phase out the $7,500 tax credit, demand spiked as consumers tried to take advantage of it.
Q3 deliveries were the highest in company history, and Tesla responded to the loss of the tax credit with the launch of the Model 3 and Model Y Standard.
Additionally, analysts have announced high expectations this week for the company on Wall Street as Robotaxi continues to be the focus. With autonomy within Tesla’s sights, things are moving in the direction of Robotaxi being a major catalyst for growth on the Street in the coming year.
Elon Musk
Tesla needs to come through on this one Robotaxi metric, analyst says
“We think the key focus from here will be how fast Tesla can scale driverless operations (including if Tesla’s approach to software/hardware allows it to scale significantly faster than competitors, as the company has argued), and on profitability.”
Tesla needs to come through on this one Robotaxi metric, Mark Delaney of Goldman Sachs says.
Tesla is in the process of rolling out its Robotaxi platform to areas outside of Austin and the California Bay Area. It has plans to launch in five additional cities, including Houston, Dallas, Miami, Las Vegas, and Phoenix.
However, the company’s expansion is not what the focus needs to be, according to Delaney. It’s the speed of deployment.
The analyst said:
“We think the key focus from here will be how fast Tesla can scale driverless operations (including if Tesla’s approach to software/hardware allows it to scale significantly faster than competitors, as the company has argued), and on profitability.”
Profitability will come as the Robotaxi fleet expands. Making that money will be dependent on when Tesla can initiate rides in more areas, giving more customers access to the program.
There are some additional things that the company needs to make happen ahead of the major Robotaxi expansion, one of those things is launching driverless rides in Austin, the first city in which it launched the program.
This week, Tesla started testing driverless Robotaxi rides in Austin, as two different Model Y units were spotted with no occupants, a huge step in the company’s plans for the ride-sharing platform.
Tesla Robotaxi goes driverless as Musk confirms Safety Monitor removal testing
CEO Elon Musk has been hoping to remove Safety Monitors from Robotaxis in Austin for several months, first mentioning the plan to have them out by the end of 2025 in September. He confirmed on Sunday that Tesla had officially removed vehicle occupants and started testing truly unsupervised rides.
Although Safety Monitors in Austin have been sitting in the passenger’s seat, they have still had the ability to override things in case of an emergency. After all, the ultimate goal was safety and avoiding any accidents or injuries.
Goldman Sachs reiterated its ‘Neutral’ rating and its $400 price target. Delaney said, “Tesla is making progress with its autonomous technology,” and recent developments make it evident that this is true.
Investor's Corner
Tesla gets bold Robotaxi prediction from Wall Street firm
Last week, Andrew Percoco took over Tesla analysis for Morgan Stanley from Adam Jonas, who covered the stock for years. Percoco seems to be less optimistic and bullish on Tesla shares, while still being fair and balanced in his analysis.
Tesla (NASDAQ: TSLA) received a bold Robotaxi prediction from Morgan Stanley, which anticipates a dramatic increase in the size of the company’s autonomous ride-hailing suite in the coming years.
Last week, Andrew Percoco took over Tesla analysis for Morgan Stanley from Adam Jonas, who covered the stock for years. Percoco seems to be less optimistic and bullish on Tesla shares, while still being fair and balanced in his analysis.
Percoco dug into the Robotaxi fleet and its expansion in the coming years in his latest note, released on Tuesday. The firm expects Tesla to increase the Robotaxi fleet size to 1,000 vehicles in 2026. However, that’s small-scale compared to what they expect from Tesla in a decade.
Tesla expands Robotaxi app access once again, this time on a global scale
By 2035, Morgan Stanley believes there will be one million Robotaxis on the road across multiple cities, a major jump and a considerable fleet size. We assume this means the fleet of vehicles Tesla will operate internally, and not including passenger-owned vehicles that could be added through software updates.
He also listed three specific catalysts that investors should pay attention to, as these will represent the company being on track to achieve its Robotaxi dreams:
- Opening Robotaxi to the public without a Safety Monitor. Timing is unclear, but it appears that Tesla is getting closer by the day.
- Improvement in safety metrics without the Safety Monitor. Tesla’s ability to improve its safety metrics as it scales miles driven without the Safety Monitor is imperative as it looks to scale in new states and cities in 2026.
- Cybercab start of production, targeted for April 2026. Tesla’s Cybercab is a purpose-built vehicle (no steering wheel or pedals, only two seats) that is expected to be produced through its state-of-the-art unboxed manufacturing process, offering further cost reductions and thus accelerating adoption over time.
Robotaxi stands to be one of Tesla’s most significant revenue contributors, especially as the company plans to continue expanding its ride-hailing service across the world in the coming years.
Its current deployment strategy is controlled and conservative to avoid any drastic and potentially program-ruining incidents.
So far, the program, which is active in Austin and the California Bay Area, has been widely successful.
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