Wall Street has been raising its price targets on
Tesla
stock and earnings estimates on the electric-vehicle maker. Not fast enough though. That means a likely earnings beat when Tesla reports second-quarter numbers on July 19.
Jefferies analyst Philippe Houchois raised his price target and earnings estimates for
Tesla
(ticker: TSLA). His price target was raised to $265 from $185 a share. The analyst’s 2023 full-year earnings estimates rose 12 cents to $2.83 a share from $2.71.
Houchois sees profit margins bottoming out in the second quarter after early 2023 price cuts sent gross profit margins in the car business to 21% in the first quarter, down almost 12 percentage points year over year. Bottoming is a positive, but Tesla stock has become more expensive thanks in part to optimism over artificial intelligence. (Tesla uses AI to train its self-driving features).
Valuation is one reason he still rates Tesla stock at Hold. Tesla shares started the year trading at roughly 25 times earnings expected over the coming 12 months. Shares traded close to 40 times in late April when Houchois downgraded shares to Hold from Buy. Now Tesla stock trades for about 65 times estimated earnings.
With Monday’s target price bump, the average analyst price target has risen to about $221 a share. The average target started the year at about $255, then dropped as low as about $190 before rebounding. Record deliveries were the catalyst for the recent changes. Tesla delivered about 466,000 vehicles in the second quarter. Wall Street was expecting closer to 445,000 vehicles. That beat has driven Tesla’s price target up roughly $7 a share.
Higher deliveries have changed earnings estimates along with price targets. At the end of the second quarter, Wall Street projected earnings per share of $3.38 for 2023. That’s risen to about $3.40.
The 2-cent move is a tiny change, but not all analysts change estimates between deliveries and earnings, which will be reported July 19. That dynamic makes the second-quarter estimate look a little light. Analysts project Tesla will earn 79 cents a share. That estimate is up from 77 cents before deliveries were reported.
Based on recent changes from Houchois and others, the number could be closer to 90 cents a share. Investors love better-than-expected earnings, but some good news is reflected in Tesla stock. It’s up about 5% since deliveries were reported. Coming into Monday trading, Tesla stock has jumped about 123% this year.
Shares were up 0.6% in premarket trading following Houchois’ report.
S&P 500
and
Nasdaq Composite
futures fell 0.2% and 0.4% respectively. Tesla is trying to snap a two-day losing streak. That isn’t much of a streak, but Tesla stock hasn’t dropped three consecutive days since late April.
Write to Al Root at [email protected]
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