Tesla Bull says investors are ‘misdiagnosing’ fundamentals

Tesla Bull says investors are ‘misdiagnosing’ fundamentals

  • Supply constraints may have caused a 95,000-unit shortfall in first-quarter deliveries for Tesla, a CANACCORD analyst says.
  • The analyst sees scope of positive earnings revisions over the remainder of 2024.

Amid the prevailing negativity surrounding Tesla, Inc. one analyst reaffirmed his bullish stance on the company on Tuesday.

What Happened: The negativity surrounding Tesla has reached extreme levels, with a recent surge in negative and bearish feedback serving as a clear indicator of the “lopsided” sentiment, stated Canaccord Genuity analyst George Gianarikas, as per excerpts from his note shared by Tesla influencer Sawyer Merritt on X.

While acknowledging some of the concerns raised by skeptics, Gianarikas noted, “Yes, the company is ‘between 2 major growth waves.’ Yes, earnings revisions have been nasty for some time.” However, he emphasized that the issues surrounding first-quarter deliveries were primarily supply-related, rather than stemming from demand issues.

“That means people may be mostly misdiagnosing current Tesla fundamentals,” Gianarikas said.

The analyst’s model indicates that supply constraints may have led to a 95,000-unit shortfall in first-quarter deliveries. Gianarikas also raised the possibility of positive earnings revisions throughout 2024, driven by potential margin expansion due to the cessation of price cuts, at least for the time being, and the anticipated ramp-up in Cybertruck production.

Additionally, the analyst revised his first-quarter delivery estimates for Tesla from 441,000 units to 420,000 units, with investor expectations hovering in the low 400,000-unit range. He also adjusted his 2024 volume estimate from 2.08 million units to 2.04 million units, citing an increase in tax rate and operating expenditure adjustment, leading to a reduction in his 2024 earnings per share estimate for Tesla from $4.02 to $3.60.

Gianarikas highlighted Tesla CEO Elon Musk‘s directive for Tesla employees to install and demo full self-driving Beta for customers taking delivery in North America. He also noted that Tesla will offer one month of free Full Self-Driving (FSD) to all U.S. Teslas starting this week.

“We have been strong advocates of Tesla’s razor/razorblade approach in seeding the market with vehicles that are software upgradable with a high-margin software — and see this as a potential catalyst for future penetration gains,” Gianarikas remarked. However, he underscored the need for additional price cuts to boost FSD penetration.

The CANACCORD analyst maintained his Buy rating and $234 price target, suggesting approximately 32% upside potential.

Why It’s Important: Unlike Gianarikas, most analysts view demand as a significant issue, particularly as EV adoption slows and agile startups, especially those from China, chip away at Tesla’s market share in a contracting market. The only ray of hope for Tesla lies in swiftly launching its sub-$30K EV to penetrate the low-end market segment.

Furthermore, FSD revenue streams may not become meaningful contributors until Tesla can convince regulators and users about its safety and effectiveness.

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