Tesla TSLA Should Be in Investors’ Portfolios, Says Piper Sandler

Tesla TSLA Should Be in Investors’ Portfolios, Says Piper Sandler

Tesla receives a $300 price target confirmation from Piper Sandler after the earnings release. Having seen the results of the company's work, the firm has no doubt that “investors should own TSLA.”

On Wednesday, Tesla reported quarterly earnings of $1.19 per share which beat the analyst consensus estimate of $1.13 by 5.31 percent. This is a 40 percent increase over earnings of $0.85 per share from the same period last year. The company reported quarterly sales of $24.32 billion which beat the analyst consensus estimate of $24.03 billion by 1.20 percent. This is a 37.24 percent increase over sales of $17.72 billion in the same period last year. Following the release of Q4 2022 results, Piper Sandler released a note to clients in which he wrote that the firm still had no doubts that investors should own TSLA and confirmed a $300 PT.

Analysts wrote that 2022 has been a tough year for TSLA, but in their view, it was due to misplaced concerns that closing backlogs and lower prices are indicative of competition or weak demand. The firm continues to believe that closing Tesla's gap was primarily due to the company's rapid growth in productivity, as well as maximizing market share in high-price, low-volume segments. Weak macroeconomic performance was also a factor. But now that Tesla has slashed prices, incoming orders are flooding the company's factories again, with order rates outpacing production capacity by 2x, and Tesla is not about to slow down.

Here are Piper Sandler's most important takeaways after the Q4 earnings report results:

  • Adjusted EPS of $1.18 missed our estimate of $1.25 but beat consensus by $0.08
  • Absent force majeure events, Tesla has the ability to make/sell 2M units in 2023...
  • ...this is roughly in line with our forecast, and implies a return to 50%+ growth
  • Tesla Energy is starting to pull its weight; we expect margin-accretive growth in 2023
  • Energy gross margin was 12.1% in Q4 (highest in 3+ years); margins should keep rising
  • Growth in Energy is due to rising battery capacity; major opex spending isn't required
  • Investors shouldn't be spooked by a large q/q decline in automotive gross margin...
  • The CFO didn't say so, but <20% automotive gross margin may be possible in early 2023
  • Even with weak gross margin in 1H, we still expect full-year EBIT margin in the mid-teens
  • We expect Tesla to discuss several new growth levers at the analyst day on March 1st
  • Management is NOT hedging commentary re: full self-driving (FSD) software
  • Over $300M of 100% margin FSD-related deferred revenue was recognized in Q4
  • As peers de-emphasize robo-taxis, Tesla insists: FSD remains a core focus
  • Cash generation continues to impress: free cash flow was $7.5B in 2023
  • The balance sheet is solid: net cash is $19B and the cash conversion cycle is -11 days
  • We plan to update our model after studying the 10 K: our DCF-based PT remains $300

H/t @RonMadison11/Twitter

© 2023, Eva Fox | Tesmanian. All rights reserved.


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This article is for informational purposes only. You should not construe any such information or other material as an investment, financial, or other advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, or offer by Eva Fox, Tesmanian, or any third party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.

Eva Fox holds zero shares of Tesla, Inc., and currently (at the time of this article's publishing) holds zero options or securities in Tesla Inc. and/or its affiliates.

About the Author

Eva Fox

Eva Fox

Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.

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