Tesla's shrinking margins are 'keeping investors up at night.' Here's what 4 analysts had to say about the outlook for EV maker's stock after first-quarter earnings
Tesla shares dropped Thursday as investors zeroed in on the company’s drop in margins in its Q1 earnings report.
Margin concerns are ‘keeping Tesla investors up at night,’ said Wedbush analyst Dan Ives.
Here’s what Ives and other Tesla analysts are saying about Tesla’s earnings report and the stock.
These 13 members of Congress have traded stock in Elon Musk’s companies during 2022
After buying Twitter, Elon Musk now leads two companies — Twitter and Tesla — with popular stock.
Insider found more than a dozen members of Congress or their spouses traded stocks in one or both companies in 2022.
Congress is debating whether members and their families should be banned from trading individual stocks.
After completing his purchase of Twitter, serial entrepreneur Elon Musk — the wealthiest person in the world — is now the leader of two publicly-traded companies: Tesla and soon-to-be-private Twitter.
The two companies, which are cumulatively worth billions, have traded for years on the NASDAQ stock market, sometimes even by some of the nation’s most powerful politicians and their families.
Insider found that at least 13 members of Congress or their family members personally traded stocks in Twitter or Tesla in 2022.
Congress, meanwhile, is currently debating whether its members, their spouses, and dependent children should even be allowed to buy, hold or sell, individual stocks.
Musk, for his part, has emerged as an unavoidable global presence deeply involved in media, communications, transportation, and even space.
Here are the 13 members of Congress who reported stock trades in Twitter and Tesla in 2022, according to an Insider analysis of lawmakers’ personal financial disclosures filed with Congress:
Rep. Nancy Pelosi, a Democrat from California
On March 17, 2022, House Speaker Nancy Pelosi’s husband, Paul, exercised 25 call options (2,500 shares) of Tesla stock at a strike price of $500, with the trade valued at between $1 million and $5 million
Rep. Pat Fallon, a Republican from Texas
Rep. Pat Fallon purchased stock in Twitter valued between $15,001 and $50,000 on January 19, 2022
Fallon purchased stock in Twitter valued between $50,001 and $100,000 on January 24, 2022
Fallon sold between $50,001 and $100,000 worth of Twitter stock as part of the company’s corporate stock buyback after Musk took the company private
Sen. Sheldon Whitehouse, a Democrat from Rhode Island
Sen. Sheldon Whitehouse purchased stock in Tesla valued between $15,001 and $50,000 on January 28, 2022
Rep. John Garamendi, a Democrat from California
On January 14, 2022, Rep. John Garamendi’s spouse sold between $1,001 and $15,000 worth of stock in Twitter
Rep. Mike Garcia, a Republican from California
Rep. Mike Garcia purchased stock in Tesla worth between $15,001 and $50,000 on January 25, 2022
Garcia purchased stock in Tesla valued between $15,001 and $50,000 on February 23, 2022
Garcia purchased stock in Tesla worth between $50,001 and $100,000 on September 29, 2022
Rep. Josh Gottheimer, a Democrat from New Jersey
On January 26, 2022, Rep. Josh Gottheimer and his spouse jointly sold stock in Tesla valued between $1,001 and $15,000
On January 31, 2022, Gottheimer and his spouse jointly sold between $1,001 and $15,000 worth of Tesla stock
On February 7, 2022, Gottheimer and his spouse jointly purchased Tesla stock valued between $1,001 and $15,000
On May 26, 2022, Gottheimer and his spouse jointly purchased between $1,001 and $15,000 worth of Tesla stock
On November 2, 2022, Gottheimer and his spouse jointly sold between $1,001 and $15,000 worth of Tesla stock
On November 9, 2022, Gottheimer and his spouse jointly sold between $1,001 and $15,000 worth of Tesla stock
Rep. Kim Schrier, a Democrat from Washington
On March 22, 2022, Rep. Kim Schrier’s spouse, David Gowing, sold stock in Tesla worth between $250,000 and $500,000
On March 22, 2022. Rep. Kim Schrier and her spouse jointly sold stock in Tesla worth between $250,000 and $500,000
Rep. Vicente Gonzalez, a Democrat from Texas
On May 29, 2022, Rep. Vicente Gonzalez purchased Tesla stock valued between $100,001 and $250,000
Rep. Chris Jacobs, a Republican from New York
On July 18, 2022, Rep. Chris Jacobs purchased stock in Tesla valued between $1,001 and $15,000
Rep. Kathy Manning, a Democrat from North Carolina
On September 12, 2022, Rep. Kathy Manning’s husband, Randall Kaplan, sold stock in Tesla valued between $1,001 and $15,000
On October 12, 2022, Manning’s husband purchased stock in Tesla valued between $1,001 and $15,000
Rep. Ro Khanna, a Democrat from California
On September 5, 2022, Rep. Ro Khanna’s dependent child sold Tesla stock worth between $1,001 and $15,000
On September 19, 2022, Khanna’s dependent child sold Tesla stock valued between $1,001 and $15,000
On September 29, 2022, Khanna’s dependent child purchased Tesla stock valued between $15,001 and $50,000
On September 29, 2022, Khanna’s spouse, Ritu Khanna, purchased stock in Tesla valued between $1,001 and $15,000
Rep. David McKinley, a Republican from West Virginia
On September 21, 2022, Rep. David McKinley purchased stock in Tesla valued between $1,001 and $15,000
Rep. Robert Aderholt, a Republican from Alabama
On December 5, 2022, Rep. Robert Aderholt’s child sold stock in Tesla valued between $1,001 and $15,000
14/14 SLIDES
Tesla shares dropped Thursday as investors zeroed in on declining margins at the electric vehicle maker, prompting some analysts to reduce price targets and weigh on the company’s strategy of cutting prices to uphold demand.
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“With no rose-colored glasses: margins are now a delicate issue that are keeping Tesla investors up at night,” Wedbush analyst Dan Ives said in a note to clients Thursday.
Tesla shares fell 7% to $167.69 during the session. The stock was still up about 36% so far in 2023.
Tesla’s first-quarter results included automotive gross margin excluding federal credits of 19.3%, sliding from 29.1% in the first quarter of 2022. Its operating margin, a profitability gauge, fell to 11.4% from 19.2% in the same period a year ago.
Tesla CEO Elon Musk indicated the company’s priority for now is growth over profit and said the company is navigating through an “uncertain'” macro environment.
“[It’s] better to ship a large number of cars at a lower margin and subsequently harvest that margin in the future as we perfect autonomy,” Musk told analysts during Tesla’s conference call Wednesday.
Net income dropped by 24% to $2.51 billion from a year ago, partially pressured by Tesla’s price cuts. The latest round of cuts was issued just before the first-quarter results were released late Wednesday. Price tags on some Model Y units were reduced by $3,000.
Here what some analysts are saying about Tesla’s stock and its earnings report:
Wedbush analyst Dan Ives – cut price target to $215 from $225.
“The near-term margin pain for long-term demand/volume gain is a strategy the Street is mostly on board with, however dipping below the magical 20% threshold is a concern,” said Ives. “While the bearish 16%-18% gross margin number did not happen and Auto GM was better than worst-case fears, Tesla is perfectly comfortable going below 20% with Street questions about the trajectory going forward,” he said.
The company “walks a tight rope” between margin pressure versus driving stronger global demand for its Model Y and Model 3 vehicles. Its delivery guidance of 1.8 million is achievable, said Ives.
“In a nutshell, we remain very bullish on the Tesla story, HOWEVER this margin compression and price cut narrative must be carefully managed over the coming quarters as it now emerges as a clear overhang on the stock.”
CFRA senior equity analyst Garrett Nelson – cut 12-month price target to $250 from $275
“With not much in the way of new developments, and the company merely meeting Street expectations instead of beating them despite a modest gross margin miss, we view the stock’s decline …. as understandable,” said Nelson.
“But with Austin and Berlin [factories] continuing to ramp, first deliveries of the Cybertruck, groundbreaking of the Mexico plant expected in the coming months, and a low-priced coupe that we believe will be introduced in ’24, we remain at a Strong Buy.”
David Trainer, CEO of New Constructs – “Shares could trade as low as $28”
“Tesla has grown deliveries at less than the 50% year-over-year (YoY) ‘goal’ in four straight quarters as well as for the full year 2022. If the company cannot meet its own growth goals, no matter how lofty, then the time has come for bulls to re-evaluate their growth expectations,” said Trainer in a note from his investment research firm.
“TSLA Has 85%+ Downside Even If Units Sold Grows 3.5x,” he said. “If we estimate more reasonable (but still very optimistic) margins and market share achievements for Tesla, the stock is worth just $28/share. Here’s the math, assuming Tesla’s:
Net Operating Profit After Tax margin is 13% in 2023 and falls to 7% (equal to Toyota’s TTM margin) in 2023–2031, • revenue grows at consensus rates in 2023 (26%), 2024 (30%), and 2025 (23%),
revenue grows 10% a year from 2026–2031, and
invested capital grows at a 6% CAGR from 2023-2031, then the stock would be worth just $28/share today – an 85% downside to the current price.”
Jefferies analyst Philippe Houchois – “Still looking for a margin floor”
“Guidance of 1.8 million units maintained but Q1 did not give great confidence on price elasticity or a gross margin floor given priority on volume over near-term profitability,” he wrote in a note that maintained Jefferies buy rating on Tesla with a $230 price target.
“No gross margin guidance into Q2 likely to trigger some downward revisions to consensus, although cost indicators (logistics, commodities at worst point) and clear improvements in lithium cost.”
