Investor's Corner

Tesla’s (TSLA) Q3 showing, FSD Beta still haven’t won over some analysts

(Photo: Andres GE)

Rumer Willis once said, “Everybody is going to have an opinion on you; not everyone is going to like you.”

Tesla (NASDAQ: TSLA) is certainly feeling that now. After showing its most successful quarterly performance in company history last week during the Q3 Earnings Call and releasing the Full Self-Driving Beta, some analysts still are not bullish on the electric car company.

Citibank Research analyst Itay Michaeli still isn’t completely convinced that Tesla’s margins and growth reflect its current price per share. He believes the company is somewhat overvalued.

Michaeli bumped his price target to $137 from $117 on Tuesday morning, giving TSLA a “Sell” rating after the company reported record deliveries, production figures and released the most sophisticated version of its self-driving software.

In a note to investors, Michaeli says he is more bearish about execution in gross margins and believes the current price per share reflects something much larger than what Tesla has shown thus far.

“Our price target goes to $137 from $117 on higher LT margin assumptions reflecting greater confidence in gross margin execution,” Michaeli wrote in the note to Citi investors. “That said, we believe the stock still reflects a significantly more robust growth/margin outcome than what we view as most likely, leaving us at Sell. We expect the NT focus to shift to Q4/’21 demand metrics and full self-driving progression.”

Tesla owners share first impressions on Full Self-Driving beta’s real-world performance

Interestingly, what Citi considers “most likely” seems to be a diminishment of demand, production, deliveries. But this would be far from likely, considering Tesla has shown Quarter-over-Quarter demand and production increases regularly. The only outlier in 2020 was when its main production facility in Northern California was closed during the first month and a half of Q2. This scenario saw Tesla’s delivery and production numbers slip slightly, but the company still managed to turn a profit.

To assume Tesla will not grow as Giga Shanghai is expanding to welcome Model Y production, Giga Berlin and Texas are both being built, and the company is coming off of such a strong quarter is a real stretch. The EV market’s demand and growth continue to be displayed, and Tesla is head and shoulders above everyone else. Not only does the automaker offer the highest-performing, longest-range electric cars on the market, but it also has introduced the most sophisticated self-driving software to the public with the FSD Beta.

Of course, not all analysts are going to be bullish on Tesla. However, indicating that the company will see a leveling or a decline in sales and demand as the sector is taking off is an interesting take.

Michaeli holds a 49% success rate and an average return of -19.7%, according to TipRanks.

Disclaimer: Joey Klender is a TSLA Shareholder.

Tesla’s (TSLA) Q3 showing, FSD Beta still haven’t won over some analysts
To Top