Investors cheer as Tesla shows strong growth in quarterly deliveries.
Tesla, Inc. (NASDAQ: TSLA) witnessed a significant jump of 6% in its share price on Monday. This surge came on the heels of the company’s impressive quarterly deliveries, surpassing expectations. It also indicates the success of CEO Elon Musk’s strategy to boost volumes through discounts.
Consequently, Tesla’s market capitalization is projected to rise by approximately $50 billion, reaching a staggering $900 billion based on premarket trading activity.
Tesla’s Remarkable Growth in 2023
Having already doubled in value this year, the stock now stands at $277, soaring above price targets set by analysts. Some brokerages caution that aggressive discounting may impact margins, but the overall sentiment remains optimistic.
Record-Breaking Deliveries
Tesla’s strategic price cuts have proven fruitful, resulting in an impressive delivery of 466,140 vehicles during the period from April to June. This marks a 10% increase from the previous quarter and 83% growth compared to the same period last year. In addition, the gap between production and deliveries narrowed to 13,560 in Q2 from 17,933 in the previous three months.
“Tesla’s price cuts are working in a big way,” said Gene Munster, managing partner at investment firm Deepwater Asset Management. “The average growth of deliveries over the previous seven quarters was 50%. This (quarter) marks a measurable step up in growth.”
Analysts Bullish on Tesla
Several analysts have raised their price targets on the stock, expressing confidence in Tesla’s ability to exceed its annual deliveries target of 1.8 million vehicles. With approximately half already delivered in the first half of 2023, the projections seem conservative.
Despite the positive outlook, the median price target on the stock is currently $210, approximately 20% below the last closing price. Tesla’s forward price-to-earnings ratio is around 62.9, significantly higher than traditional automakers like Ford (8.82) and closer to tech giants like Amazon.com (62.66).
“The key question for investors is what might margins be,” Bernstein analyst Toni Sacconaghi said in a note.
“We continue to believe that Tesla will need to further lower prices this year and/or next year to achieve its volume targets, incrementally pressuring margins.”
Margin Pressure Expected
Tesla reported a total gross margin of 19.3% in the first quarter, but Wall Street anticipates a dip to 18.6% when the second-quarter results are released on July 19. The company faces some challenges in maintaining margins amidst the discounting efforts.
Despite concerns about margins, many analysts believe Tesla’s stock still has room to grow as the company continues to expand its global market share. In addition, Tesla’s charging system is nearing becoming the U.S. standard, which could further drive growth.
“Our money’s on Elon,” said Canaccord Genuity analyst George Gianarikas, who lifted his price target on Tesla by $36 to $293.
Mary Lee is a freelance writer and journalist based in Toronto, Canada. She holds an M.S. degree in business and economic journalism from Columbia University’s Graduate School of Journalism in New York and a certificate in digital marketing from the University of Toronto.
