Goldman Sachs Research released Tesla's Q2 2021 net income report in a note dated July 13. The firm raised its 2021 earnings per share estimate due to higher vehicle prices, and also raised its 2022/2023 estimates for higher supply (based on Model Y), partially offsetting the decline in regulatory credit earnings. Model Y has the same cost structure as Model 3 but has a higher selling price, so moving to Model Y should be a tailwind for margin, all other things being equal.
Goldman Sachs sees that Tesla faced a number of hurdles in Q2, including chip shortages, high shipping costs, rising raw material prices, and limited production and supply of Model S and X. However, the firm has revised its EPS estimate for 2021 to the upside. Goldman Sachs model Q2 2021 non-GAAP EPS (ex. SBC) at $0.94 (from $0.84 prior). The firm expects the price increases and Model Y ramp to have a larger impact on Q3 and Q4 results, and their new 2021 non-GAAP EPS estimate of $5.00 is above FactSet consensus at $4.28 and Bloomberg at $4.43. This is largely due to their higher delivery numbers assumption of 875K.
The firm recommends buying Tesla shares as it believes Tesla will deliver significant revenue and margin growth over the medium to long term due to its leading position in the electric vehicle industry. Goldman Sachs also believes the California-based manufacturer’s complete ecosystem (e.g. clean energy, storage, charging) and the growing installed base of cars will open up other vectors of growth/profit, and help Tesla have a strong share and profit from electric vehicles even with increased competition. The firm's 12-month price target remains at $860 and is based on 14x applied to EV/Q5-Q8 revenue.
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