Tesla Rallies Off Q4 Earnings: This Item 'Was All Bulls Needed To Hear,' Analyst Says

Electric vehicle giant Tesla Inc TSLA beat analyst estimates for both revenue and earnings per share in the fourth quarter. Here's what the Street has to say Thursday about the quarterly print. 

The Tesla Analysts: Bernstein analyst Toni Sacconaghi has an Underperform rating and $150 price target. 

Oppenheimer analyst Colin Rush has a Perform rating and no price target.

Guggenheim analyst Ronald Jewsikow has a Sell rating and $89 price target.

Piper Sandler analyst Alexander Potter has an Overweight rating and $300 price target. 

Related Link: Trading Strategies For Tesla Stock Before And After Q4 Earnings 

The Tesla Takeaways: While the fourth-quarter earnings report beat estimates, Sacconaghi said there was something for both bulls and bears in the report and commentary.

“Musk’s proclamation that orders YTD were 2x production amid price cuts and that Tesla was targeting 1000+ GW in cell production over time (equivalent to 14 million cars) was all bulls needed to hear,” Sacconaghi.

While the report offered many signs of growth for the future, Sacconaghi highlighted the margins as being a concern.

“Auto gross margins were much worse than anticipated. Most notably, these margins were before the real price cuts kicked in earlier this month.”

The analyst sees the potential of margins breaching 20% for some quarters in 2023.

“It is unclear if consensus numbers will get reset sufficiently and whether Tesla could still struggle with demand issues over the course of the year. Recent demand challenges also raise questions on whether long term forecasts for Tesla’s market share and margins may be too high.”

Rusch also found items for both bulls and bears to like in the earnings report and conference call.

“We expect bulls to point to numbers bottoming out, price drops driving demand increases, TSLA’s structural cost advantages, potential for operating leverage, and improving FSD performance,” Rusch said.

The analyst said bears can point to recession concerns that could impact new car purchases and increased competition for the electric vehicle market. The analyst also sees uncertainty over Twitter’s finances as part of the bear case.

“While we anticipate shares will trade higher into the company’s March 1 analyst day as bearish scenarios do not appear to be playing out, we continue to expect a choppy start to the year and remain on the sidelines.”

Jewsikow said the fourth-quarter earnings results from Tesla were “soft,” with gross margins coming in below analyst estimates and a lower tax rate helping the earnings beat.

“Order commentary was encouraging, albeit not a surprise, but wait times remain at trough levels and short-term demand creation from sizable price reductions must be sustained into a ramping supply backdrop,” Jewsikow said.

The analyst said he was surprised to see Tesla shares rallying after-hours Wednesday with revisions likely coming to gross margins by analysts.

“We believe Bulls will interpret order commentary as TSLA largely derisking the 1.8 million delivery guidance at current prices globally, but we feel this is misguided as supply continues to ramp and the demand pull-forward from price reductions wanes.”

The analyst also sees risks for Tesla in China and Europe.

Potter called 2022 a tough year for Tesla but said this could have been from misplaced concerns from investors over backlogs and price cuts.

“We continue to believe that Tesla’s shrinking backlog was due primarily to the company’s rapidly-rising production rate, as well as maxed-out market share in low-volume, high-price segments,” Potter said.

The analyst said Tesla could have the ability to make and sell 2 million units in 2023, ahead of the company’s guidance of 1.8 million units.

Potter also points to the analyst day on March 1 as a catalyst for the company, with new growth levers being teased.

“We still strongly recommend owning the stock.”

TSLA Price Action: Tesla shares were trading 8.95% higher at $157.35 Thursday morning.

Read Next: Here's How Many Vehicles Tesla Has Delivered And Produced In Each Quarter Since 2019 

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