Credit Suisse Reaffirms Tesla’s $1,000 Price Target
2Q gross margin came largely in-line with consensus given well-documented challenges of the period.
“While the impacts from the shutdown of Shanghai were clear within the results, they were less severe than our expectations. Improvements in the energy business also point to higher demand and pricing power in solar and stationary storage. The 2Q print also allows investors to now focus on the second half of 2022, which Tesla enters with the momentum of record production in June, developing ramps at both its new facilities, and the tailwinds associated with being at the center of the global EV revolution amidst strong gasoline price environment. We reaffirm our Outperform rating and $1,000 TP.
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Margins see step back, but not as far as we had anticipated: Tesla’s auto gross margin ex reg credits (including SBC) came in at 26.2%, near the consensus range, but ahead of our estimates. GM% declined 380bps Q/Q owing to Shanghai’s lower mix of Tesla’s overall volumes and hence challenges with fixed cost absorption, but the margin print likely saw some offset from a strong June, and ongoing kaizen throughout Tesla’s operations.
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2H weighted volumes: Tesla reit. its 50% y/y volume growth (for ’22 as well as the foreseeable future) target despite volume constraints in 2Q. Meeting this target will require continued expansion at Shanghai as well as progress on the ramps of both Berlin and Austin during 2H22. We maintain our ’22 Tesla deliveries estimate of 1.39mn, just ahead of consensus at 1.38mn.
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Outside auto volumes, 2Q print was mixed: An encouraging gross margin result in Tesla’s energy business (11.2% vs. cons. -3.3%) added optimism, but valid questions around the ramp of 4680 cells and FSD progress deserve monitoring going forward.
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We maintain our Outperform rating, $1,000 TP, and our ’22 volume estimate of 1.39mn units. We raise our ’22 EPS estimate to $13.38 vs. prior $11.96 due to higher gross margins. Risks include increased competition, miseexecution on growth plans, disruptions from COVID-19 restrictions, and input cost inflation.”
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