Jefferies analyst raises Tesla FY’22-23 Earnings estimates by 7-9%, lowers PT to $1,250

Written by Cláudio Afonso |

Jefferies analyst Philippe Houchois has raised Tesla’s Full Year 2022 and 2023 Earnings estimates by 7-9% due to recent price hikes and higher free cash flow. However, the Analyst lowered Tesla’s price target from $1,400 to $1,250 to reflect higher inflation and due to “a 50bps increase in assumed cost of capital”.

“With cash accumulating at a faster pace than Tesla’s ability to grow physically, we look forward to Elon Musk revealing Master Plan Part 3. However, taking into account a riskier macro and geopolitical environment for valuation, we reduce our 12-month PT to $1,250 ($1,400).” — the analyst said.

Raising Estimates

“We had expected 2022 to be another defining year of widening gaps incl complexity and manufacturing, with Tesla carving up more meaningful share from Legacies (JEFe 1 +pp globally). We barely trimmed 2022 volume on minor plant launch delays (vs earlier estimates but raised average ASP an average $2k, increasing revenue 2% to $89bn and GAP EBIT 14% to $12.8bn, including better scaling of R&D and SG&A while keeping auto gross margin unchanged at 29%. With capex guided flat this year and next as the focus is to activate existing capacity, we see Tesla generate FCF of $10 and $14bn this year and next, while returns on capital look set to accelerate sharply, in excess of 40%.”

Price target

“We set 12-month price targets and the current macro environment will likely cap valuation upside across markets. While we raise FCF estimates, a 50bps increase in assumed cost of capital to 6% reduce our target to $1.250.”


Long term View — Base Case

  • “Tesla is the only OEM durably engaged in an EV volume +ve sum game and one of the few OEMs set to grow earnings and ROIC in 2022-23.
  • We expect 5-year CAGR revenue growth c.40% (from 2020), with Tesla ramping up Model 3/Y and expansion into stationary storage driving revenue growth until Cybertruck starting 2022
  • Forecast gross auto margin ex ZEV incl. leasing of 28% by 2022 vs 21% in 2020.
  • Expect 13-14% GAP BIT margin in 2022-23 and positive op FF c.$6.9/10.7bn. incl ZEV credit income phasing out to zero by 2024
  • $1.250 PT based on DCF based on 5vr revenue CAGR of 40% (guide 50%), peak margin of 17% by 2025 and terminal growth of 3% and cost of capital of 6%.”

Last week,  after Elon Musk warned for the “recent inflation pressure in raw materials & logistics”, Tesla raised the prices of all its models in the U.S. and on Model Y, Model 3 in China. After these price increases, Model 3 Performance costs now $78,440, Model Y Performance $85,440, Model S Plaid $158,440, and Model X Plaid $162,440 — all of these prices are for the fully optioned version. Comparing Year-over-Year, Model X Long Range was the model with the highest price increase, from $89,990 to $114,990 — 28%

GigaBerlin Factory will open on Tuesday after being delayed several times during the last months for many different reasons. The Team received, on Friday, an e-mail from the company announcing that the first deliveries of GigaBerlin-made vehicles will start on Tuesday, March 22. The Gigafactory is located in Brandenburg and is Tesla’s first manufacturing location in Europe and its most advanced, sustainable and efficient facility yet.

Written by Cláudio Afonso |