Tesla could triple its EPS through 2024: CFRA’s Garrett Nelson

on Oct 19, 2022
  • Tesla reports lower-than-expected sales for its fiscal third quarter.
  • CFRA Research's Garrett Nelson shares his outlook on Tesla Inc.
  • Tesla stock is currently down about 45% versus the start of 2022.

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Tesla Inc (NASDAQ: TSLA) reported record operating profit for its fiscal third quarter on Wednesday. Shares are still trading down in extended trading since revenue came in shy of Street estimates.

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Why did sales miss estimates?

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The electric vehicles manufacturer attributed the weakness to macro headwinds, including higher commodity prices and bottleneck in transportation capacity. Geopolitical concerns and supply chain issues remain a challenge for Tesla as well.

Then, of course, there’s the question of whether CEO Elon Musk will have to sell more of Tesla shares to complete the $44 billion Twitter deal. Still, Garrett Nelson (CFRA Research) said on CNBC’s “Closing Bell”:

We really view these concerns as priced in, given the decline in the stock over the past month. We could see a scenario where he doesn’t have to sell any more Tesla stock in order to close the Twitter deal.

Tesla stock has an 80% upside

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Tesla had its Shanghai factory deliver a record number of vehicles in September. Investors have recently started pushing the multinational to launch a buyback programme, which, if announced, will serve as a catalyst for the stock.

Even absent that, we view Tesla as one of the best earnings growth stories. We see Tesla’s earnings per share roughly tripling between 2021 and 2024. They were the auto industry’s biggest winner from the Inflation Reduction Act.

Tesla is expected to begin delivering its “Semi” – its heavy-duty electric truck in December, which, as per Nelson, will be another near-term positive for the stock. He recommends buying shares of Tesla and has a price target of $400 – about an 80% upside from here.

We know they continue to ramp up their factories in Austin and Berlin, and recently completed an upgrade in Shanghai. So, we really wouldn’t bet against Tesla. Their earnings track record has been outstanding over the last few years.

Notable figures in Tesla Q3 earnings report

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  • Earned $3.29 billion that translates to 95 cents a share
  • Per-share earnings on an adjusted basis were $1.05
  • Sales went up 56% year-on-year to $21.45 billion
  • Consensus was a dollar of EPS on $21.98 billion sales

Automotive gross margin remained sequentially unchanged at 27.9%. Regulatory credits accounted for 1.5% of the total quarterly automotive revenue – the cost of which was up more than 25% in Q3 (quarter-over-quarter), as per the earnings press release.  

Deliveries missed expectations in Q3 by 21,660 as Invezz reported earlier in October. Nonetheless, Tesla reiterated its multi-year commitment to a 50% annualised increase in vehicle deliveries.

Tesla stock is down 45% for the year.


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