Credit: Luke Sharrett/ Bloomberg

RBC Capital upgrades Tesla to Outperform, expects gross margins above 30%

Written by Cláudio Afonso | | LinkedIn | Twitter

RBC Capital analyst Joseph Spak upgraded the firm’s rating on Tesla on Monday from Sector Perform to Outperform lowering the price target to $1,100 from $1,175. Spak says near-term seems set-up favorable for the company expecting Tesla to deliver 396k vehicles in the third quarter among lockdown measures lift in Shanghai. The analyst added believing that the company’s margins “can surprise to upside” in Q2 and reach over 30% in the second half of the year.

“Near-term set-up seems favorable. Visible Alpha 2Q22 consensus delivery forecast is 279k units, though we believe the buyside expects a ~250k print effectively in line with our new 249k forecast. With investors primed for lower deliveries, we believe 2Q22 margins can surprise to upside. 1Q22 auto GM ex-credits was 30% and walking q/q lower volume, higher depreciation weigh, but pricing can offset (see our walk inside). We forecast 2Q22 auto GM ex-credits at ~28.6%,” the analyst said.

“Visible Alpha consensus 2Q22 auto gross margins ex-credits is 26.4%, but that is also built on that 279k unit forecast which is likely to come down. So we see the potential for low margin expectations and hence a margin beat. Looking ahead we are positive as well. For 3Q22, RBC is at 396k deliveries vs. consensus at 378k and we see 2H22 auto gross margins >30% as Shanghai gets back to pace, Berlin and Texas ramp and pricing gains continue,” Spak added.

Last Friday, Barclays analyst Brian Johnson raised the firm’s price target on Tesla to $370 from $325 while reiterating an underweight rating on the shares. The analyst says that Tesla’s Q2 production and margins are set to disappoint as Shanghai “shackles output” estimating now 251,000 units from 315,000 prior (below the 303,000 consensus).

Written by Cláudio Afonso | | LinkedIn | Twitter