One of Wall Street’s biggest Tesla bulls is doubling down on his optimism for the stock despite 2021’s underwhelming performance.
In a Friday note to clients, Wedbush’s Dan Ives reiterated his 12-month price target of $1,000 for the electric vehicle maker’s stock, representing 32% jump from current levels.
After a record 740% rally in 2020, Tesla has eked out a mere 3% gain so far this year. Ives blamed a number of issues for the underperformance, including the lingering semi-conductor chip shortage, safety concerns in China, regulatory concerns, and rising electric vehicle competition.
“That said, seeing the forest through the trees we believe Tesla has a number of growth levers into 2022 that should accelerate growth and profitability with global EV demand further inflecting over the next 12 to 18 months,” said Ives. “We continue to believe there are many winners in the EV arms race to play this transformational growth opportunity including traditional stalwarts and pure play EV OEMs/supply chain plays with Tesla front and center.”
According to Ives, those headwinds in China are beginning to reverse course, and Tesla is on track to hit 900,000 annual deliveries in 2021. While electric vehicles only represent 3% of the overall automobile industry globally, he sees that share growing to 10% by 2025 as countries move towards reducing carbon emissions. This will result in a boom of demand for electric vehicles, and Tesla’s stock is poised to benefit, he said.
The analyst also explained that the semiconductor chip shortage is a “near-term” issue that the company will be able to get past.
Shares of Tesla slipped 0.15% on Friday after the opening bell.
Tesla’s plan to build a humanoid robot is an “absolute head scratcher” that comes at a time when the EV company needs to focus on addressing more pressing issues like securing China demand, safety, and the chip shortage, Wedbush’s Dan Ives said.
The EV giant announced its plan to build a robot-called the “Tesla Bot”- during Thursday evening’s hotly anticipated AI Day. The robot will perform repetitive, often “boring” tasks and drive labor costs down over time, Tesla said.
However, Dan Ives said in a Friday note the robot will “agitate investors” and has nothing to do with the company’s near-term focus.
“While we appreciate Musk’s longer term technology vision, a Tesla Bot is not what investors want to see with instead much more focus on chips, FSD, and re accelerating China EV demand in this key market at a critical juncture,” said the senior analyst and longtime Tesla bull.
Earlier this week, the US regulator for auto safety opened an investigation into Tesla’s autopilot system following a number of collisions. The announcement sent Tesla’s stock price down nearly 5%, but the company has since pared back losses.
The probe could may take several years to resolve, according to Goldman Sachs. But Wall Street hasn’t moved price targets yet. On Monday, Goldman reiterated it’s $875 price target for Tesla. Dan Ives maintained his $1000 price target for Tesla, one of the Street’s highest.
But Ives cautioned: “The safety issues on self driving remain a concern for investors that has gained steam over the past week representing another overhang for the stock.”
Shares of Tesla were up roughly 1.9% after the opening bell on Friday.
The National Highway Traffic Safety Administration said it will conduct a preliminary evaluation of an estimated 765,000 Tesla Models Y, X, S, and 3 from 2014 to 2021, according to documents on the regulator’s website.
The NHTSA identified 11 crashes since January 2018 in which Tesla models struck one or more vehicles at first responder scenes.
“Most incidents took place after dark and the crash scenes encountered included scene control measures such as first responder vehicle lights, flares, an illuminated arrow board, and road cones,” according to the NHTSA.
It said all the vehicles involved were confirmed to have been engaged in either Autopilot or Traffic Aware Cruise Control during the approach to the crashes.
The NHTSA since June 2016 has sent investigative teams to 31 crashes involving partially automated driver assist systems, according to the AP report. 25 of the crashes involved Tesla Autopilot in which 10 deaths were reported, the report said, citing data released by the agency.
Shares of Tesla gained as much as 3% on Friday after the company said it delivered 201,250 vehicles during the second quarter.
Those results were about in-line with analyst estimates of 201,820 vehicles delivered, according to a Friday note from Wedbush analyst Dan Ives. Tesla’s delivery figures were driven by the success of its Model 3 and Model Y, which represented 199,360 of the vehicles delivered. That beat analyst estimates of 194,770.
Meanwhile, Tesla’s delivery of 1,890 higher-margin Model S and Model X vehicles missed analyst estimates of 5,550.
In a tweet on Friday, Musk congratulated the Tesla team on its delivery figures: “Congrats Tesla Team on over 200,000 car built & delivered in Q2, despite many challenges!!”
Those challenges referenced by Musk include semiconductor shortages, which has hampered production for automakers across the globe.
Tesla “yet again defied the skeptics and bears calling for a sizable miss with the chip shortage and China PR issues lingering in the month of April,” Ives said.
That’s according to Wedbush’s Dan Ives, who has an “outperform” rating for the stock and price target of $1,000, a nearly 49% jump from current levels.
In a Monday note, the senior technology analyst noted three “perceived headwinds” that Tesla is facing right now: the chip shortage, political blowback in China from recent safety issues, and rising electric-vehicle competition around the globe.
As Elon Musk appeared on SNL, Lucid Motors, Ford, and Volkswagen all showcased their flagship eclectic vehicles in separate advertisements during the broadcast. But Ives said that Tesla remains the leader in the market, and underlying consumer demand looks robust in China and Europe.
“The main line in the sand now for the bulls and bears is not the near-term chip shortage in our opinion (which is temporary), but rather Tesla’s ability to further penetrate China,” Ives said. “Now it’s about Musk playing nice in the sandbox which appears to be happening over the last few weeks around safety issues and making sure that Tesla does not see any stumbles/government crackdown in China which is poised to represent 40%+ of global deliveries by 2022.”
The analyst estimated that Tesla appears to be able to comfortably exceed 200,000 delivery units in the second quarter, even factoring in the chip shortage. For the next few months, Ives is keeping an eye on Tesla’s Model Y production and demand, the Model S and X makeovers, and Tesla’s higher margin software and FSD (full self-driving) purchases.
Ives said he is still bullish on the EV sector despite the risk-off selling the industry has faced over the last few months. Shares of Tesla slipped 3% Monday morning to $651.59, and the EV giant is down over 5% year-to-date. Meanwhile competitors Fisker and Nikola are both down more than 23% in the same time period, and Lordstown Motors has tumbled 60% in 2021 amid short-seller reports.
The CEO said in a tweet responding to David Portnoy’s criticism of bitcoin as a “pump and dump” scheme: “…I have not sold any of my Bitcoin. Tesla sold 10% of its holdings essentially to prove liquidity of Bitcoin as an alternative to holding cash on balance sheet.”
Tesla’s owned 41,953 bitcoin at the end of the first quarter, based off of the cryptocurrency’s closing price of $59,114 on March 31.
Tesla will report its first-quarter earnings after the market closes on Monday, and all eyes will be on guidance as the company grapples with a shortage in semiconductors.
The company already reported first-quarter deliveries earlier this month, which exceeded analyst expectations. The company said it delivered 184,800 vehicles in the quarter, representing a new record. Most of those deliveries consisted of the Model 3 and Model Y, rather than the higher-priced Model S and Model X.
The average analyst estimate for Tesla’s upcoming earnings report includes revenue of $10.3 billion and earnings per share of $0.79, according to data from Yahoo Finance.
As a whole, Wall Street remains skeptical on Tesla despite its ramping up of vehicle production over the past year. The company currently has only four buy ratings, eight hold ratings, and seven sell ratings among analysts.
Detailed below is what four Wall Street analysts expect from Tesla’s first-quarter earnings report.
JPMorgan: ‘Remain cautious on lofty valuation’
Tesla’s strong first quarter deliveries already spurred JPMorgan to increase its earnings estimates for the company earlier this month. But the bank remains cautious on Tesla, assigning the company an Underweight rating and price target of $155, representing downside potential of 78% from Friday’s close.
“While our blended price target of $155 implies -79% downside, we do not regard it as ungenerous as it actually values Tesla as the world’s second largest automaker by market capitalization, behind Toyota and roughly tied with Volkswagen despite the automakers each currently selling on the order of magnitude of 15-20x as many vehicles annually as Tesla,” JPMorgan said.
“Tesla’s current valuation appears to us to insufficiently incorporate what is likely to be greatly intensified competition in the market for battery electric vehicles and leaves little room for less than perfect execution,” JPMorgan concluded.
Credit Suisse: ‘Upside likely from regulatory credits’
Credit Suisse is ahead of consensus expectations for Tesla’s first-quarter earnings report, and sees three key themes that investors will focus on.
“Launch of new capacity remains most critical, especially in Europe,” Credit Suisse said, adding that Tesla’s Berlin factory is of highest priority as it enables Tesla to capitalize on the electric vehicle opportunity in Europe.
“1Q delivery beat reinforces upside on 2021 deliveries,” Credit Suisse said. The bank expects Tesla to deliver 929,000 vehicles in 2021, well ahead of consensus estimates of 831,000. “We expect benefit from continued ramp of China production, industry strength in US and China, and as the launch of the Berlin and Austin facilities in 2H21,” Credit Suisse said.
“Gross margin could see little upside, but investors would look past any softness,” the bank said, adding that volume strength in the quarter will likely be offset by cost inefficiencies, a negative mix of model sales, and a reduction in vehicle prices.
Credit Suisse maintains a Neutral rating for Tesla and a price target of $800.
Wedbush: ‘Expecting good news from Musk and Co.’
Wedbush analyst Dan Ives thinks Tesla will easily be able to beat Wall Street estimates for its first-quarter earnings given the company’s strong Q1 deliveries “and tight expense controls seen in Fremont.”
“The street is now laser focused on gauging the annual delivery trajectory for 2021… which we expect to drive the stock much higher over the coming months,” Ives said.
“We now believe Tesla could exceed 850,000 deliveries for the year with 900,000 as a stretch goal, despite the chip shortage and various supply chain issues lingering across the auto sector,” Wedbush said.
“We believe the tide is turning on the Street and the ‘eye popping’ delivery numbers coming out of China cannot be ignored with the trajectory on pace to represent ~40% of deliveries for Musk & Co. by 2022,” Ives concluded.
Wedbush maintains an Outperform rating for Tesla and a price target of $1,000.
RBC tweaked its first-quarter earnings estimates for Tesla following the release of its delivery figures earlier this month. RBC expects $10.5 billion in revenue for the quarter, which is lower than its previous estimate due to lower deliveries of the Model S and X, which command higher prices and profit margins.
RBC’s estimates include $400 million in regulatory credits, which Tesla sells to other automakers that don’t produce enough electric vehicles based on government mandates.
“On the call, we believe the items that will be in focus are auto-gross margins, free cash flow, capacity expansion updates, product updates and commentary about the impact of the semi-shortage to 2021 deliveries,” RBC said.
The firm lowered its 2021 delivery estimates to 825,000 from 860,000, “given we expect some supply chain issues,” RBC said. RBC maintains a Sector Perform rating for Tesla and a price target of $725.
Two men died on Saturday night when a 2019 Tesla Model S driving at high speed failed to negotiate a curve on a windy road in Spring, Texas.
Harris County Precinct 4 Constable Mark Herman said in an interview that, based on a preliminary investigation, there was no evidence anyone was at the wheel of the vehicle at the time of the crash.
“Our preliminary investigation is determining-but it’s not complete yet-that there was no one at the wheel of that vehicle. We’re almost 99.9% sure,” the constable said, per the Wall Street Journal.
The NHTSA has launched more than two dozen advanced driver-assistance-related investigations into crashes involving Tesla vehicles amid the company’s autonomous driving push.
The National Transportation Safety Board’s chairman, Robert L. Sumwalt, has also criticized Tesla on a number of occasions for their lack of compliance with regulators regarding self-driving tech.
In a 2020 NTSB meeting, Sumwalt said, “It is foreseeable that some drivers will attempt to inappropriately use driving automation systems. To counter this possibility, in 2017 we issued 2 recommendations to 6 automobile manufacturers. Five manufacturers responded favorably that they were working to implement these recommendations. Tesla ignored us.”
Just last week, Ford’s CEO also took a shot at Tesla on Twitter when announcing his company’s driverless tech, saying “BlueCruise! We tested it in the real world, so our customers don’t have to.”
Despite the recent crash, NHTSA investigations, and criticism from the competition, Tesla’s recent safety report shows its cars are some of the safest on the road.
In the first quarter of 2021, Tesla registered one accident for every 4.19 million miles driven when Autopilot was engaged. For comparison, The NHTSA’s most recent data shows there is an automobile crash every 484,000 miles on average in the US.
Even with a strong safety record, high-profile crashes like this one usually hurt Tesla’s stock.
The bearish fatal crash news also comes as Cathie Wood, one of Tesla’s biggest supporters, continues to sell shares.
The move came two months after Tesla purchased $1.5 billion of bitcoin, as CEO Elon Musk continues to lend his support to the cryptocurrency. Musk said that any bitcoin received by the company as a form of payment won’t be converted into fiat currency, signaling that Musk is bullish on the long-term potential of the cryptocurrency.
But Tesla’s decision to accept bitcoin as a form of payment for its vehicles could be a bad deal for consumers that decide to follow through with the offer for two key reasons.
First, consumers that purchase a Tesla with bitcoin will face tax consequences, especially if they are sitting on large unrealized gains, as sending bitcoin is a taxable event akin to selling a stock.
Alternatively, Tesla reserves the right to pay the consumer back in the original amount of bitcoin paid if the cryptocurrency has fallen in value since the original transaction. On top of that, if a consumer overpays in bitcoin, Tesla reserves the right to not return the over payment to the consumer.
The reasoning behind Tesla’s decision is due to the high volatility of bitcoin, which has seen single day price movements of more than 10% in both directions. On Thursday, bitcoin fell as much as 7%, pushing it near the key $50,000 level.
That’s a sizable increase from Ark’s previous 2024 price target of $1,400, and would give Tesla a valuation of about $3 trillion. Investors are taking notice due to the accuracy of Wood’s previous eye-popping price predictions for Tesla stock.
The price target incorporates expectations that Tesla will launch an autonomous robotaxi service built upon its full self-driving tech platform, which could bring in as much as $327 billion in revenue, according to Ark.
“In preparation for its robotaxi service, Tesla could launch a human-driven ride-hail network first, delivering a highly profitable recurring revenue stream and limiting the downside of a failed autonomous service,” Ark explained.
In its bear case, Ark expects Tesla to trade to $1,500 per share as it sells 5 million cars per year. In its bull case, Ark expects Tesla to trade to $4,000 per share as it sells upwards of 10 million cars per year. In 2020, Tesla sold about 500,000 vehicles.
Tesla remains the largest holding for Ark Invest across all of its ETF strategies, and this isn’t the first time the investment management firm had a sky-high price target for Tesla.
In 2018, Wood said Tesla would hit $4,000 when the stock was trading at a split-adjusted price of about $250. The stock went on to trade at a split-adjusted price of $4,500 in early 2021, two years ahead of schedule.