Investor's Corner
Tesla shares hit three-month high as Wall St firm ups Model 3 delivery estimates
Tesla shares (NASDAQ:TSLA) are approaching a 3-month high amidst new, optimistic expectations from a Wall Street firm about the Model 3’s delivery figures for Q2 2018. After Tuesday’s opening bell, Tesla stock was trading up $2.52% at $340.18 per share, the first time the company’s shares have hit the ~$340 range since March 13, 2018.
According to KeyBanc Capital Markets analyst Brad Erickson in a note to clients Monday, Tesla could positively surprise by delivering as much as 30,000 Model 3 for the second quarter. The Keybanc analyst further noted that the firm’s updated delivery estimates come from checks with Tesla’s sales centers.
“Our checks with sales centers indicate Model 3 deliveries are tracking ~50% higher than our prior estimates for the quarter, prompting us to raise our estimates. While the longer-term debate on TSLA remains more balanced … we maintain that evidence supporting the bear case is not likely to emerge in the near term, in our view,” the KeyBanc analyst wrote.
Tesla’s stock has seen an impressive recovery since the company held its 2018 Annual Shareholder Meeting, where CEO Elon Musk expressed an optimistic outlook about the production figures for the Model 3 and the ongoing expansion of Tesla’s energy business. Yesterday, Tesla’s momentum proved consistent, with shares rising an additional 4.55% to end the day’s trading at $332.10 per share amid CEO Elon Musk’s Twitter update about the first Full Self-Driving features for Tesla’s Hardware 2.0 fleet being released sometime in August as part of Software Version 9.
In his note, Erickson stated that his conversations with Tesla sales representatives in 20 stores revealed that delivery figures for Q2 2018 are pointing to numbers that are higher than his initial estimates, which stood at 20,000 Model 3 for the second quarter. Erickson also noted that he had increased Tesla’s full-year Model 3 delivery estimate from 98,182 to 118,182.
“We believe weekly run-rate volumes have moved from the high teens per store per week to the low 30s since our last checks in mid-April,” he wrote.
KeyBanc Capital Markets’ optimistic outlook on Tesla’s Model 3 performance this quarter comes as the latest vote of confidence for the Elon Musk-led company. Just yesterday, analysts from Berenberg raised its price target for Tesla to $500 per share, citing Tesla’s technological advantage over its competitors and a possible 25% gross margin for the Model 3.
After Tesla’s now-infamous Q1 2018 earnings call, Elon Musk predicted that the “short burn of the century” would be happening as the company starts achieving profitability. Last week alone, Tesla shorts lost $1.1 billion in mark-to-market losses on a single day as the company’s shares rose almost 9.7%. According to S3 Partners’ analyst S3 Partners’ Ihor DusaniwskyIhor Dusaniwsky, Tesla short-sellers are currently sitting on nearly $5 billion in mark-to-market losses since 2016, and this number could grow materially if the Elon Musk-led company can hold on to its current momentum.
According to a report from The Street, Tesla stock has already broken through the $310 resistance level, opening the door to more upside, and a test of the intermediate-term downtrend that identifies the top of Tesla’s correction up at $340 per share. If Tesla breaches the $340 mark, bulls can expect the ongoing uptrend to accelerate even more.
As of writing, Tesla stock is trading up $2.52% at $340.18 per share on Tuesday’s intraday.
Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.
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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