Tesla Rises as Record Deliveries Stoke Street Confidence

(Bloomberg) -- The recent rally in Tesla Inc. shares after the company reported record quarterly deliveries shows that investors are growing more optimistic on the company as it proves it can walk the walk, according to analysts.

The electric carmaker’s fourth quarter deliveries of 112,000 units topped Street expectations, defying skeptics by hitting its 2019 delivery guidance. Tesla delivered 367,500 vehicles total in 2019, beating the low end of its forecast for at least 360,000.

Shares in Tesla rose as much as 5.5% on Friday. Still, the upbeat delivery numbers haven’t been enough to encourage some analysts to turn bullish on the stock. Of the analysts tracked by Bloomberg, 11 have buy-equivalent ratings, 10 rate it hold and 15 sell, with an average price target is $304, implying a 32% decline.

Here’s a round-up of what analysts are saying:

Wedbush, Daniel Ives

“This was another major feather in the cap for Musk & Co. by handily beating the Street’s 106k unit bogey in the quarter and speaking to the momentum Tesla is seeing specifically in Europe.”

If the company can keep up the same level of profitability and demand going forward, especially in Europe and China, the stock has the chance to open up a new chapter of growth and multiple expansion.

“While part of this recent rally has been a massive short covering, it has also been driven by underlying fundamental improvement as the company’s ability to impressively not just talk the talk but walk the walk has been noticed by the Street and the optimism around the story has grown markedly from the dark days seen earlier in 2019.”

Rates neutral, price target $370.

Bernstein, Toni Sacconaghi

Despite the strong fourth-quarter deliveries, there’s a risk of meaningful deceleration in the first quarter this year. About 7,000 of the 12,000 sequential increase in Model 3 deliveries came from the Netherlands. The country is witnessing a pull-forward due to the change in electric-vehicle taxes, which is a similar headwind in the U.S.

Negative seasonality and an uncertain ramp of domestically manufactured Model 3s in China are among the other headwinds. Conversations with management suggest that the Shanghai Gigafactory may prove a larger-than-expected drag on fourth-quarter gross margins.

“It remains to be seen whether these myriad headwinds will offset Tesla’s continued cost-takeout and fixed cost leverage from higher sequential production.”

Rates market-perform.

Canaccord Genuity, Jed Dorsheimer

“We view these results as a clear indication that EV demand remains strong for Tesla and that the company is well positioned for 2020 with continued positive momentum in all business areas.”

The update on the Shanghai facility showed production and unit run-rate capability that represent a “truly remarkable feat,” as the facility didn’t exist less than a year ago.

The focus for quarterly results will continue to be on margins and overall profitability, but the results are highly encouraging and the company is a “clear leader in the EV space.” The recently escalating geopolitical uncertainties driving oil prices higher will also likely create a tailwind for Tesla shares.

Rates buy, price target $515.

To contact the reporter on this story: Andres Guerra Luz in New York at aluz8@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Jennifer Bissell-Linsk

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