Tesla Will Likely Miss Second Quarter Earnings – So What If It Does?


Just over a week ago, Tesla (TSLA) CEO Elon Musk has issued a stark warning to investors in the company – and to investors in general. Musk said he had a “super bad feeling” about the state of the global economy and its direction. His sentiment was bad enough, in fact, that according to some reports, Tesla might be preparing to lay off 10% of its workforce (or at least 10% of its salaried workforce) to right-size the company to meet the lower demand for electricity. Vehicles.

Just over a week later, we just got more details about what the Tesla CEO is so worried about.

As Morgan Stanley analyst Adam Jonas reports in a recent research note, Musk is trying to “rally” his “troops” at Tesla to make a big electric car delivery effort this month, with the goal of to meet analysts’ targets for deliveries before the second quarter. end. Jonas notes that “multiple media sources” confirmed this call from Musk (but Tesla itself, which no longer has a media department, has yet to confirm this).

Whether or not Tesla ultimately confirms media reports, a big push at the end of the second quarter would be both standard operating procedure for Tesla – and also entirely understandable given the company’s likely delay in quotas. of production, after a week-long Covid-inspired shutdown of Tesla’s Shanghai gigafactory in China. As Jonas points out, 40% of the Teslas produced in the world are produced locally at this Shanghai factory, and China accounts for “well over 50%” of the profits Tesla makes in an average quarter.

With just two weeks left in the quarter, however, Tesla is unlikely to be able to make up its shortfall even with a strong surge in deliveries late in the quarter. If he fails to achieve his goal, how bad news would that be for Tesla?

Jonas has some thoughts on this and – good news for Tesla shareholders – he’s not worried at all.

Jonas admits there is a risk that Tesla will end up delivering less than 300,000 EVs in the second quarter (he thinks deliveries could reach 292,000 units). He also predicts that Tesla’s revenue will not reach $18 billion and that earnings before interest, taxes, depreciation and amortization (EBITDA) could be 10% lower than analysts’ expectations. Still, in the analyst’s view, these misfires will all be down to Tesla’s inability to produce cars fast enough to meet demand – not because of any lack demand. As a result, Jonas believes that a missed delivery in the second quarter will create pent-up demand, leading to a bumper crop of deliveries in the third quarter. And by the end of the year, “any lingering impact of the Shanghai lockdown on Tesla’s production [will] Most likely [be resolved].”

And here’s some more good news: According to Jonas, Tesla may be preparing to add China’s BYD as a battery supplier for its cars. According to the analyst, this is good news both because supplier diversification is always a good idea, and also because adding BYD to its list of suppliers will increase price competition. – and will keep prices low – for batteries sourced from Tesla’s preferred Chinese supplier, CATL. This creates the potential for Tesla to enjoy stronger profit margins even as its supply and production issues resolve towards the end of this year.

It also helps explain why, even as Tesla appears to be racing towards a Q2 “miss out,” Jonas is still pricing Tesla stock overweight (i.e. buy) with a price target of $1,300. . (To see Jonas’ track record, Click here)

Overall, there is positive sentiment on Wall Street about TSLA, with some caution. The moderate buy consensus rating is based on 30 analyst reviews which include 16 buys, 8 holds and 6 sells. The average price target of $917.10 suggests an upside of around 34% from the current trading price of $683. (See TSLA stock forecast on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the analysts featured. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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