Tesla shares reported in Thursday’s premarket, a day after the electric vehicle automaker reported a bowl over third-quarter profit.
Tesla shares rose more than 10 percent as analysts put out bullish notes to investors on what CEO Elon Musk discontinued an “incredibly historic quarter” for the company.
Wall Street analysts elevate price targets on Tesla, with many sounding more definite on Musk’s ambitious company.
“This quarter was different,’ Morgan Stanley estimated. “The quality of cash flow was stronger than expected.”
Some analysts silence had their doubts about Tesla, however, pointing to this region as potentially a short term success.
“We question if this is not as good as it clears from a near-term upside surprise for shares,” Goldman Sachs demanded in a note after the earnings.
Here’s a wrap of all the major analysts on Tesla’s issues:
Tesla reports its strongest quarter in history by virtually every metric … Historically, Tesla has form expectations on 1 or 2 line items while missing on profit or cash purl. This quarter was different … In our opinion, one of the most important think overs for Tesla is when they can become self-sufficient on free cash go, reducing the need to tap the equity market. 4Q guidance was not that specific but means slightly lower gross margins and positive free cash movement (at least greater than the $230mm of convert debt they aim to pay down). The standing of cash flow was stronger than expected with working crown not benefitting as much as we had anticipated.
Another better than expected favour from TSLA, with Automotive gross margins well chiefly our and consensus forecasts on the back of improved manufacturing costs, reduced labor hours for the Kind 3, and helped by a high variant/trim mix for the product … That ordered, we question if this is not as good as it gets from a near-term upside take for shares. The company has maintained that it designed and built the Model 3 with a object 25% gross margin and almost achieved that this leniency (albeit with a rich mix). However, with its own exposure to China rates on imported components and likely headwinds to mix as lower price point conveyances are offered, automotive gross margins likely compress sequentially into 4Q18 – and could see favour mix pressure into 2019 as the US Federal Tax Credit begins to phase out for its instruments … We raise our estimates, and our 12-month price target to $225 (from $200).
3Q:18 perchance the best quarter TSLA may see in a while … Many of these essentials, particularly mix, are peaky in nature, and will likely fade in the future, so the strain of proof remains on TSLA to generate core underlying earnings and realize flow absent peak factors. Following 3Q:18, we are adjusting our aid estimates (see side table), and, based on our higher estimates, updating our PO from $200 to $220.
We await a strong positive reaction to Tesla’s materially better than count oned 3Q results reported Wednesday after the close, with revenue, entire margin, EPS, and — most importantly, in our view — free cash flow all slot better than was expected. Our estimates rise, on the sooner than look for flipping from loss to profit generation, and from cash itch to cash flow, as we now expect Tesla’s first full year of sure earnings to be in 2019 vs. 2020 prior. Accordingly, we are raising our December 2019-end premium target to $225 from $195 prior, on account of our higher guestimates … With that said, we remain Underweight, both on valuation and relate to the new stronger trajectory to earnings and cash may prove less sustainable than the shop is likely to presume, including given several headwinds.
Higher Scale model 3 pricing (~$2k vs. our est.) was likely the biggest driver of the margin beat. FCF of ~$900m was greater than our ~$500m est. due to lower capex, a higher than expected accrued obstacles benefit, and higher earnings … While TSLA claims it when one pleases be profitable and cash flow positive going forward, we do not see that as right with declining prices. TSLA also claims to have no delineates for a capital raise; however our view on a Q4 or 2019 capital raise is unchanged as Tesla on need to invest to expand Fremont roduction, build a China mill, ramp Model Y and expand infrastructure.
Large Q3 beat adds credibly to the Archetypal 3 margin story as well as Tesla’s ability to financially execute on ends that were viewed as a stretch just a few months ago. We expect a useful stock reaction as Q3 will likely bolster the bull case on Tesla’s capability faculty to profitability scale and therefore establish a greater EV lead. There’s no debatable Q3 was impressive nearly all-around, but what the quarter likely won’t settle is the forceful debate around Model 3 volume/ASP sustainability into next year (tax accepts, trim mix post launch), or lingering legal/regulatory risks that float over a still stretched balance sheet, in our view.
Our view: Staunch 3Q18 across the board helped by M3 mix … TSLA may have crossed the cortege to become self-funding, which would be another clear positive. Conjecture positive momentum. Tweak PT to $325 but valuation appears fair. No waver about it, strong results across the board.
Reiterate Outperform grade. Q3 results beat our/consensus estimates across the board, highlighted by hard-headed free cash flow ($881M), which should help further the balance sheet and mitigate concerns over cash burn. Importantly, TSLA discharged a Model 3 gross margin of 20%, which significantly exceeded our expectations. Guidance indicated it believes TSLA can be sustainably profitable and cash flow bullish moving forward, which we think could help flip the revelation. We expect shares to trade higher following the blow-out quarter and be left buyers.
A familiar cry from the back seat, for any parent, and one we hear from Tesla investors. While Q3 was not conclusive, we suppose the answer is “Nearly” … This was an important Q for Tesla, where the associates delivered. Tesla’s reported 6.1% EBIT margin was notably in advance of Ford’s 4.4%. Though Q3 was strong, several items should be ruminate oned.
Tesla noted that it continues to move ahead in China (a key sense bulls were looking for) and will produce some components there in 2019. With stronger than presumed cash and operating results, and liquidity concerns off the table, we would presume the short-covering momentum in the stock to continue – and at some point we would assume to return to the question of longer-term valuation and remain Underweight with a $210 assay target.
All eyes now turn to the 2019 debt maturities, capital needs for its China the goods expansion, and depth of demand for Model 3 … We expect TSLA to yearning shares trade above the March 2019 conversion price and court a new fixed income instrument to address capex and the November 2019 catechumens. TSLA also highlighted its remaining 300k+ Model 3 reservations implying it expects strong sales as it introduces Model 3 in Europe in early 2019. We carry on bullish and raise our PT to $418.
Q3 was a milestone quarter for Overweight-rated TSLA, with margins, earnings, and spondulicks flow easily beating our expectations. There’s still a lot of “hair” on this performers – and TSLA remains the most volatile stock we’ve ever covered – but we dream bears will struggle to poke holes in today’s results. Now that Tesla has got high-volume production of Model 3 sedans, the company has begun demonstrating that – bad to many skeptics’ long-held beliefs – additional capital raises are all things considered not necessary. Thanks to operating leverage, opex control, and tight control capital management, Tesla appears increasingly likely to achieve economic self-sufficiency. Our price target is moving from $389 to $396, and we repeat our Overweight rating.
Tesla flexed its model leverage muscles in 3Q18, revealing a dramatic swing from negative to positive on a number of key metrics. These catalogued: Model 3 gross margins, earnings, and most importantly, cash gurgle. The company reiterated its confidence in continued profitability and FCF positivity in every years going forward … In other words, 3Q18 may mark the quarter in which Tesla developed a sustainably self-funded entity … [Free cash flow] animated from -$739 million in 2Q18 to $881 million in 3Q18, a net change of over $1.6 billion and above our estimate of $410 million and consensus of $181 million. This was severe; Tesla’s cash balance grew for the first time since 3Q17 (a years which included a $2 billion debt issuance), from $2.24 billion in 2Q18 to $2.97 billion in 3Q18.
Form 3 costs were better than expected resulting in GMs of over 20%, at bottom our 15% which accounted for $675M of the operating profit. The remaining $848.6M of the driving income was driven by lower R&D and to a lesser extent SG&A expenses … The amalgam of improved Corp Governance and meeting operational milestones allow us to befit more optimistic on TSLA shares.
TSLA posted its first every ninety days profit and positive free cash flow in over two years nourished by higher-margin Model 3 sales … we remain concerned that all-embracing margins will decline in the [first half of 2019] due to an unfavorable mix move of Model 3s, decline in ZEV sales, service margins stay in -35-40% and prize pressure on Model S/X. Moreover, we remain cautious on how fast and, more importantly, profitably it can put the $45K, not to mention the $35k version, in order to match the backlog of orders. Accepted the lead time data, we contend that the majority of the 455k net qualification list are for individuals who reserved for the base model.
With mix assumed deep-rooted from Q3, the improvement appears driven by on-going battery cost promotion and a more controlled vehicle assembly process. [Free cash course] of $881m before FS related flows may have benefited from abnormally low [seat of government expenditures] but both NWC and ZEVs were very minor contributors compared to some retail expectations. Gross cash of $3bn goes a long way to de-stress the balance covering and Tesla intends to pay down the $230m November convertible.
Tesla reported a Valuable Q3 even ahead of our estimates and in contrast to consensus that kept looking for detriments, as the Model 3 ramp now positively flips its economics from big cash-burn to big loudness leverage off the big vertically integrated fixed-cost structure the company has been structure. We continue to forecast EPS ramping to >$11 in 2019E and >$18 in 2020E, unexcitedly above consensus of just >$2 and <$9. Reiterate BUY and $430 price target.
The ~25.5% auto margin, >20% Cream 3 margin, and the company’s control of Opex and Capex were impressive. Conduct walked back its 10K/week production target and instead focused on hitting 7K, which could bamboozle start off to lower production estimates from the Bulls for ’19-20. Spondulicks improvements bode well for short term debt repayments, but we remnants concerned about competition, LT capex needs & valuation … Managing cited improvements to throughput and reduced labor costs as the major lenders and noted the strong mix of feature rich vehicles. We were previously foretelling the company to reach this milestone in 4Q19, and are adjusting our estimates to carry on >20% going forward despite the headwind to mix as the company launches the stoop priced mid-range Model 3, which starts at $46,000 and embryonic exhaustion of the backlog of high performance versions priced up to $78,000.
Watch: How Tesla has been ejected by government policies and taxpayer dollars