While some on Wall Street appeared to take disappointing Tesla Inc. results in stride, one analyst was ringing alarm bells over Elon Musk’s “bold” predictions and his “almost dismissive” attitude towards any questions about the company’s future.
That analyst, Bernstein’s Tony Sacconaghi Jr., was referring to Wednesday evening’s earnings call with Musk that followed third-quarter results that revealed car deliveries falling short of forecasts and gross-margin disappointment.
“Aside from the financials, the earnings call didn’t sit well with us. Answers to many
questions on the earnings call were curt and almost dismissive, with CEO Musk instead repeatedly making very bold prognostications about Tesla’s future and capabilities,” Sacconaghi, who rates Tesla underperform with a $150 price target, told clients in a note.
Musk issued a forecast that Tesla would at some point be worth as much as the two most valuable companies in the world, Apple Inc. AAPL, +7.56% and Saudi Arabian Oil Co. 2222, -1.14%, combined. Both have market capitalizations atop $2 trillion. So far this year, Tesla’s stock has had a bumpy ride, about 37% lower.
“Tesla’s valuation appears to imply huge volume AND industry leading profitability going forward, which is historically unprecedented,” said Sacconaghi.
Investors seemed to be feeling some of that uncertainty on Thursday, as shares fell 5% in premarket trading to $209.47 per share. Tesla also lowered its full-year delivery expectations, as Musk dangling a possible $5 billion to $10 billion share buyback didn’t seem to be helping much.
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To be sure, Bernstein’s Sacconaghi is a bit of a contrarian when it comes to the investor favorite. Of the 42 analysts surveyed by FactSet, 27 have the equivalent of buy ratings on Tesla, 11 are neutral and 4 have the equivalent of sell, with the average stock price target of $306.83, as of Thursday.
A more sanguine view came from RBC Capital Market’s team of analysts, Joseph Spak and Chris Dendrinos, who rate Tesla outperform, though they dropped their price target to $325 from $340 per share on back of the results.
“Elon talked about ‘recessions’ in China and Europe (US pretty good) that’s causing demand to be a little harder than it otherwise would be. Still, they are very confident in a record 4Q22 seeing “excellent” demand for the quarter and the factories running hard,” said the pair, in a note to clients.
RBC analysts expected automotive gross margin — which came in at 27.9% versus consensus of 27.4% — will likely work its way back towars 30% next year. The analysts highlighted another selling point for Tesla, its advantageous positioning — highlighted by Musk — for EV, solar and storage related benefits via the Inflation Reduction Act (IRA).
Also cutting their target price on Tesla was Mizuho — to $330 from $370 per share, while maintaining a buy rating. Analyst Vijay Rakesh said they “continue to see solid production ramp and stable profitability,” though added global macro risks to consumer spending were rising and the company’s mergers and acquisition activity a “near-term overhang.”
Some have blamed Tesla’s weak stock performance this year to Musk being distracted by his attempt to acquire Twitter TWTR.
Read: Elon Musk ‘excited’ by Twitter’s potential, even though he’s overpaying
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