Can Tesla (TSLA) deliver with its Q3 deliveries? Today, the electric car maker is expected to report its initial Q3 delivery and production unit numbers, with investors eagerly waiting to see if Musk & Co. can once again beat the estimates.
Weighing in for Wedbush, five-star analyst Daniel Ives tells clients that there has been a robust trajectory of deliveries over the last few weeks as the lockdowns have started to ease, with a similar dynamic also being seen across parts of Europe. This represents “some positive tea leaves for the Tesla bulls,” in his opinion.
As for the “clear standout” in the quarter, Ives points to the huge underlying demand from China, especially for the Model 3 vehicles, which “remains a ray of shining light for Tesla in a dark global macro.” Not to mention Giga 3 has been firing on all cylinders going into the last quarter of 2020, with the factory representing “the linchpin of success,” according to the analyst. Ives added, “Overall, Tesla continues to see DeChambeau-like strength around deliveries which bode well for Q3 results.”
Wall Street is calling for deliveries of 136,000, with 121,000 of these being Model 3 or Y. Ives, however, thinks this figure is too low.
Expounding on this, the analyst stated, “We believe Tesla with a very strong end to the quarter likely could now be in the 140,000-plus range which could put the bottom-line in the area code of $0.55-$0.60 of EPS, another major feather in the cap for Musk & Co. in this soft macro backdrop with competitors across the board struggling to hit numbers. To this point, we believe with margins incrementally higher on a Model 3 sold in China vs. the U.S./Europe this could markedly increase the profitability profile for Tesla over the next few years as ultimately we see China representing 40%-plus of global sales for the company potentially by early 2022.”
What’s more, Ives believes additional leverage from Giga 3 as well as price cuts in the U.S. and China could drive even more demand as the macro conditions further improve and the lockdowns continue to ease globally.
To this end, TSLA’s goal of reaching 500,000 deliveries globally for the year appears to be on track despite the COVID crisis, with the 1 million delivery mark potentially coming by 2023, based on Ives’ forecasts.
Even though all of this is promising, Ives is taking a wait and see approach. He keeps a Neutral rating and $475 price target on the stock. Investors could be pocketing a gain of 11%, should this target be met in the twelve months ahead. (To watch Ives’ track record, click here)
Turning to the rest of the Street, other analysts also take a cautious approach. With 6 Buys, 14 Holds and 10 Sells assigned in the last three months, the word on the Street is that TSLA is a Hold. At $302.56, the average price target implies 27% downside potential. (See Tesla stock-price forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
