Investor's Corner
Tesla’s strong August start confidently brings in reiterated support from Piper Sandler
Tesla’s (NASDAQ: TSLA) stock has experienced a positive August thus far, despite being only three days into the month. Just a week after Tesla reported positive earnings for Q2, Piper Sandler analysts Alex Potter and Winnie Dong are reiterating their support for the automaker’s stock, solidifying their belief that Tesla is primed to navigate competition in 2022 successfully.
The note, released on August 3rd, outlines Piper Sandler’s recent examination of the 10-Q filing Tesla submitted to the SEC. Following the 10-Q’s public release and synopsis last week, Piper Sandler said that “nothing fishy” pops out, and automotive margins were impressive past anyone’s scope of prediction. Additionally, Tesla stated in the document that it could recognize $1.3 billion in self-driving software within the next 12 months. Contributing to an already impressive gross margin that fueled Tesla’s eighth-consecutive profitable quarter, the analysts suggest that margin could exceed the mid 20’s.
The outlook for Tesla moving forward is strong, especially as the company has the most robust products, and battery electric vehicle adoption continues to rise in nearly every region worldwide. The note indicates that the span of 2022-2025 should be the strongest span for the adoption of EVs due to more manufacturers committing to the production of their initial electric models. The note indicates that Tesla is primed to navigate and accomplish increased vehicle production and delivery volume based on widespread EV adoption. “Tesla is still the driving force behind higher BEV penetration globally,” the note says. Tesla holds 67% of all BEV sales in the U.S. in 2021. The company ranks #2 in China, only trailing the Wuling-GM-SAIC conglomerate that produces the HongGuang Mini EV.
Sure ??$TSLA https://t.co/BfbBlsz3gK pic.twitter.com/TOYaNIAwzz
— David Tayar (@davidtayar5) August 3, 2021
In Europe, Tesla ranks #2 as well, with 13% of EVs sold in the region. However, this is without the Model Y, Tesla’s most popular vehicle, which will be manufactured at the Giga Berlin production facility later this year. With the crossover SUV style being the most popular body style in Europe, the Model Y could help Tesla to displace Volkswagen as the current king of the BEV market in Europe, fueled by the ID.3 and ID.4.
Changes to Tesla’s 2021 Outlook
Due to lower deliveries, Piper Sandler took down their revenue estimates and modified delivery expectations. The analysts believe that Tesla will achieve 846,000 deliveries this year. With Tesla being close to halfway there after quarters of 184,800 and 201,250, delivery figures are likely to increase on a quarter-over-quarter basis. With Giga Berlin and Giga Texas expected to start production before the end of the year, 846,000 units is certainly a figure within reach if all goes according to plan.
Tesla Model 3 Standard Range Plus becomes even more competitive in China
The note also identifies several “risks to achievement of price target and recommendation,” listing several things that could move Tesla’s price target downward. These are production delays, failure to meet customer expectations, defects and recalls, supply chain disruptions, and slow adoption of electric vehicles. While all realistic negatives, Tesla has done a good job of navigating through the global semiconductor shortage that has plagued most car companies globally. In its Q2 2021 Update Letter, Tesla said that it designed 19 different semiconductors and controllers to navigate through the shortages. Additionally, build quality and product builds have improved over the last several years, and the adoption of electric vehicles, while slow, is not something that seems to be a worry based on growing adoption numbers in some countries.
Piper Sandler maintains its Overweight rating and the $1,200 price target it has had on the stock since early this year.
At the time of writing, Tesla stock was trading at $708.38, down just over $1.
Disclosure: Joey Klender is a TSLA Shareholder.
Elon Musk
Tesla locks in Elon Musk’s top problem solver as it enters its most ambitious era
The generous equity award was disclosed by the electric vehicle maker in a recent regulatory filing.
Tesla has granted Senior Vice President of Automotive Tom Zhu more than 520,000 stock options, tying a significant portion of his compensation to the company’s long-term performance.
The generous equity award was disclosed by the electric vehicle maker in a recent regulatory filing.
Tesla secures top talent
According to a Form 4 filing with the U.S. Securities and Exchange Commission, Tom Zhu received 520,021 stock options with an exercise price of $435.80 per share. Since the award will not fully vest until March 5, 2031, Zhu must remain at Tesla for more than five years to realize the award’s full benefit.
Considering that Tesla shares are currently trading at around the $445 to $450 per share level, Zhu will really only see gains in his equity award if Tesla’s stock price sees a notable rise over the years, as noted in a Sina Finance report.
Still, even at today’s prices, Zhu’s stock award is already worth over $230 million. If Tesla reaches the market cap targets set forth in Elon Musk’s 2025 CEO Performance Award, Zhu would become a billionaire from this equity award alone.
Tesla’s problem solver
Zhu joined Tesla in April 2014 and initially led the company’s Supercharger rollout in China. Later that year, he assumed the leadership of Tesla’s China business, where he played a central role in Tesla’s localization efforts, including expanding retail and service networks, and later, overseeing the development of Gigafactory Shanghai.
Zhu’s efforts helped transform China into one of Tesla’s most important markets and production hubs. In 2023, Tesla promoted Zhu to Senior Vice President of Automotive, placing him among the company’s core global executives and expanding his influence beyond China. He has since garnered a reputation as the company’s problem solver, being tapped by Elon Musk to help ramp Giga Texas’s vehicle production.
With this in mind, Tesla’s recent filing seems to suggest that the company is locking in its top talent as it enters its newest, most ambitious era to date. As could be seen in the targets of Elon Musk’s 2025 pay package, Tesla is now aiming to be the world’s largest company by market cap, and it is aiming to achieve production levels that are unheard of. Zhu’s talents would definitely be of use in this stage of the company’s growth.
Tesla analyst Andrew Percoco of Morgan Stanley teased the company’s dominance in its self-driving initiative, stating that its lead over competitors is “not even close.”
Percoco recently overtook coverage of Tesla stock from Adam Jonas, who had covered the company at Morgan Stanley for years. Percoco is handling Tesla now that Jonas is covering embodied AI stocks and no longer automotive.
His first move after grabbing coverage was to adjust the price target from $410 to $425, as well as the rating from ‘Overweight’ to ‘Equal Weight.’
Percoco’s new note regarding Tesla highlights the company’s extensive lead in self-driving and autonomy projects, something that it has plenty of competition in, but has established its prowess over the past few years.
He writes:
“It’s not even close. Tesla continues to lead in autonomous driving, even as Nvidia rolls out new technology aimed at helping other automakers build driverless systems.”
Percoco’s main point regarding Tesla’s advantage is the company’s ability to collect large amounts of training data through its massive fleet, as millions of cars are driving throughout the world and gathering millions of miles of vehicle behavior on the road.
This is the main point that Percoco makes regarding Tesla’s lead in the entire autonomy sector: data is King, and Tesla has the most of it.
One big story that has hit the news over the past week is that of NVIDIA and its own self-driving suite, called Alpamayo. NVIDIA launched this open-source AI program last week, but it differs from Tesla’s in a significant fashion, especially from a hardware perspective, as it plans to use a combination of LiDAR, Radar, and Vision (Cameras) to operate.
Percoco said that NVIDIA’s announcement does not impact Morgan Stanley’s long-term opinions on Tesla and its strength or prowess in self-driving.
NVIDIA CEO Jensen Huang commends Tesla’s Elon Musk for early belief
And, for what it’s worth, NVIDIA CEO Jensen Huang even said some remarkable things about Tesla following the launch of Alpamayo:
“I think the Tesla stack is the most advanced autonomous vehicle stack in the world. I’m fairly certain they were already using end-to-end AI. Whether their AI did reasoning or not is somewhat secondary to that first part.”
Percoco reiterated both the $425 price target and the ‘Equal Weight’ rating on Tesla shares.
Tesla stock (NASDAQ: TSLA) just got a price target boost from its biggest bear, Gordon Johnson of GLJ Research, who raised his expected trading level to one that is 95 percent lower than its current trading level.
Johnson pushed his Tesla price target from $19.05 to $25.28 on Wednesday, while maintaining the ‘Sell’ rating that has been present on the stock for a long time. GLJ has largely been recognized as the biggest skeptic of Elon Musk’s company, being particularly critical of the automotive side of things.
Tesla has routinely been called out by Johnson for negative delivery growth, what he calls “weakening demand,” and price cuts that have occurred in past years, all pointing to them as desperate measures to sell its cars.
Johnson has also said that Tesla is extremely overvalued and is too reliant on regulatory credits for profitability. Other analysts on the bullish side recognize Tesla as a company that is bigger than just its automotive side.
Many believe it is a leader in autonomous driving, like Dan Ives of Wedbush, who believes Tesla will have a widely successful 2026, especially if it can come through on its targets and schedules for Robotaxi and Cybercab.
Justifying the price target this week, Johnson said that the revised valuation is based on “reality rather than narrative.” Tesla has been noted by other analysts and financial experts as a stock that trades on narrative, something Johnson obviously disagrees with.
Dan Nathan, a notorious skeptic of the stock, turned bullish late last year, recognizing the company’s shares trade on “technicals and sentiment.” He said, “From a trading perspective, it looks very interesting.”
Tesla bear turns bullish for two reasons as stock continues boost
Johnson has remained very consistent with this sentiment regarding Tesla and his beliefs regarding its true valuation, and has never shied away from putting his true thoughts out there.
Tesla shares closed at $431.40 today, about 95 percent above where Johnson’s new price target lies.
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