we had a thread awhile back and I jumped in on the Musk / Tesla dog pile.

are they turning a corner?

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Tesla Crushed Earnings Expectations. Here’s What Wall Street Is Saying as the Stock Soars.

By Al Root
Jan. 30, 2020 8:36 am ET


Stock in Tesla is on an epic tear. Shares that traded for just $185 in May are selling for $641, up more than 10%, in premarket trading after the electric-vehicle pioneer beat Wall Street’s fourth-quarter earnings estimates.

The stock has tripled in under nine months. It’s remarkable.

Earnings, free cash flow, profit margins and Tesla’s forecast for 2020 deliveries, released Wednesday evening, were all as good as analysts expected, or better. That’s why the stock is up.

But Tesla (ticker: TSLA) remains a controversial stock on Wall Street. Analysts’ price targets range from $200 to $800 a share. The $600 spread is about equal to the current stock price, while a range equivalent to about 45% of the price is typical for stocks in the Dow Jones Industrial Average.

Bullish analysts are happy with the earnings report. Bearish analysts, on the other hand, are still quibbling with valuation. The stock does, after all, trade for about 72 times estimated 2020 earnings. It’s a big multiple, but the stock traded for more than 80 times just a couple of days ago. Earnings estimates jumped more than $1 a share after the earnings were reported.

For starters, longtime Tesla bull Baird analyst Ben Kallo may be regretting his decision to downgrade the stock after it hit about $500 a share.

“Musk lamented the lack of deep and accurate insight from Tesla analysts,” wrote Kallo in a Thursday research report. “Given our decision to downgrade when shares were about $150 lower, we accept the criticism.”

Kallo shouldn’t feel all that bad even though he rates shares the equivalent of Hold. He came into the earnings report with one of the highest price targets on the Street. Afterward, he increased his price target from $525 to $650 a share and raised his estimate of 2020 earnings from $5.41 to $8.58 a share, up more than 58%.

Wedbush analyst Dan Ives called the earnings report “potentially game changing” in a Wednesday research report. “Tesla has the potential to hit the elusive 1 million overall delivery vehicle mark potentially two years ahead of our original 2024 projections,” wrote Ives. Faster growth is another reason for the stock-price jump.

Ives still rates shares the equivalent of Hold. He took his price target from $550 to $710 a share.

“We remain cautious on chasing the stock post the year to date run up, as we continue to see a number of flaws in the prevailing bull case,” wrote Citi analyst Itay Michaeli in a Thursday research report. He worries profit margins might be pressured in 2020 as new production ramps up.

Margins can often fall at an industrial company when a new plant comes on line, but before the plant is producing a lot of whatever it makes. Tesla recently opened a new facility in China.

It’s a valid concern. Michaeli is a bear on the stock. He rates shares the equivalent of Sell and has a $220 price target.

Another bear, RBC analyst Joseph Spak, still struggles with Tesla stock valuation.

“We fully admit things are better than we expected and there is a lot of positive news flow and data points going Tesla’s way,” wrote Spak in a Thursday research report. He says Tesla has always been a hard stock to value. Spak took his target price up after the earnings report, from $315 to $530 a share, but kept his rating on the stock at the equivalent of Sell.

J.P. Morgan analyst Ryan Brinkman also increased his target price for shares after the earnings report, but only by $20, to $260. He rates Tesla stock the equivalent of Sell as well.

“Management commented it expects positive quarterly net income and free cash flow going forward, except during quarters featuring the launch and ramp of new products,” wrote Brinkman.

Tesla, importantly, believes it can fund its own growth. Capital needs have always been a sticking point for bears.

Still, all the progress wasn’t enough to change Brinkman’s mind. And it appears bull and bears will remain entrenched in their outlooks, despite the stronger-than-expected earnings.

Tesla shares were up 84% over the past three months as of the close of trading on Wednesday, crushing the comparable gains of the S&P 500 and Dow Jones Industrial Average over that span.

Write to Al Root at allen.root@dowjones.com

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Any stock that triples in under nine months should be a red flag.

This article is completely lacking any discuasion of business fundamentals (e.g. delivery and sales) necessary for valuation. Historically, comparing yesterday's valution to today's valuation instead of business fundamentals is how bubbles burst.

Insanely overvalued (as it was even before the recent run-up)....but one of the cardinal rules of trading is to never short a stock based on valuation alone.

That isn’t an article about the actual worth of Tesla. That is an article that touches on all the issues of Wall Street and trading in general. It’s an academic discussion of the how a company can be wildly over valued. How it is more important to beat the estimate than actually pull a profit. You could go on and on but you get the gist.

Tesla is not going to survive in its current guise. That’s my call. Go buy stock at the current price if you feel differently.

Nothing they do can’t be reproduced by another car company that can do it cheaper and in bigger numbers. If Tesla actually got big, lots of the niche stuff that is so admired now would go away in the typical small business to big business consolidation that always happens. “They used to so great before they got big, they were a people company”. That kind of thing.

more from the WSJ:

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Tesla Posts Fourth-Quarter Profit on Record Deliveries

Electric-car maker aims increase its vehicle sales by more than a third this year


Tesla Inc. TSLA +11.19% vowed to increase its vehicle sales by more than a third this year while posting upbeat fourth-quarter results, giving investors more reason to believe the electric-car maker has put past problems behind it.

The Silicon Valley auto maker on Wednesday said it was well on its way to producing its next car—the Model Y compact sport-utility vehicle—at its assembly plant in Fremont, Calif. First deliveries of the model are due before April, the company said. It previously said production would begin by this summer.

Tesla, which is working on transforming itself from niche manufacturer into mass-market electric-vehicle maker, told investors its business should be profitable going forward.

Chief Executive Officer Elon Musk made a similar statement a year ago. But two quarters of steep losses followed, leaving the company with a full-year $862 million loss despite a profitable second half. Tesla has never been profitable on an annual basis.

The company’s adjusted earnings per share of $2.14 for the fourth quarter topped the $1.77 a share that analysts surveyed by FactSet had predicted. Net income fell to $105 million from $140 million a year earlier.

Tesla shares rose more than 11% in aftermarket trading following Wednesday’s earnings report.

Daniel Ives, an analyst for Wedbush Securities, called the results potentially “game changing” and signaling “what could be a new era for Musk and Fremont.”

Tesla said its commitment to continuing profitability was subject to “temporary exceptions, particularly around the launch and ramp of new products.”

The 16-year-old company has traditionally struggled when introducing new vehicles. The Model 3 compact car, which began production in 2017, was plagued with months of delays that strained the company into the following year.

Mr. Musk worked through the issues and the Model 3 went on to defy skeptics. The compact car drove a 50% rise in global deliveries last year, enabling Mr. Musk to meet his goal of selling between 360,000 and 400,000 vehicles in 2019 after a rocky start that included challenges related to taking the Model 3 overseas for the first time.

The company aims to pick up the pace in 2020, announcing plans Wednesday to deliver more than 500,000 vehicles globally, up from 367,000 last year. That goal relies heavily on churning out more vehicles from Tesla’s newly opened China assembly plant.

Tesla cautioned that its vehicle production would likely outpace sales this year as its Chinese operations hit stride and the Model Y comes online.

Chief Financial Officer Zach Kirkhorn, during an earnings call with analysts and investors, said the company could face challenges in the first quarter, a period traditionally tough for sales during the winter months. Additionally, Tesla is bracing for potential fallout from the spread of the coronavirus that could hamper efforts to increase production in Shanghai and slightly dent first-quarter earnings, he said. The car maker also is on alert for potential supply-chain disruptions as companies grapple with the effects of the illness.

The fourth-quarter results also underscore the challenges Mr. Musk faces in trying to increase sales volume with high-price vehicles in Tesla’s lineup.

Deliveries soared 23% from the year-earlier quarter with the help of the Model 3, while revenue rose just 2%, to $7.38 billion. Tesla handed 112,000 new electric vehicles to customers during the final three months of the year, but deliveries of its more-expensive car models declined.

The company attributed the modest revenue growth, in part, to the introduction of a cheaper version of the Model 3 and to adjustments in pricing. “We do not expect [average selling price] to change significantly in the near term, which means volume growth and revenue growth should correlate more closely this year,” the company said.

China-made Teslas are hitting the road as buyers in Shanghai get their Model 3 sedans. But the car maker faces daunting challenges in its quest to conquer the world’s largest auto market.

Analysts estimated the average selling price of the Model 3 fell to $47,700 in the fourth quarter, from $57,000 in 2018. Combined deliveries of the Model S large sedan and Model X sport-utility vehicle fell 33% to around 67,000 last year. Those vehicles traditionally had sold for about $100,000 or more.

The company’s automotive gross margin, a closely watched measure of cost efficiencies compared to sales, fell to 22.5% in the latest quarter from 24.3% a year earlier.

Tesla has encountered challenges in some markets recently. Last year in the U.S., it sought to lower the price of its vehicles to counter the phaseout of a tax credit that effectively made the company’s cars and SUVs thousands of dollars more expensive. Tesla doesn’t break out deliveries by region, though it will give details on U.S. revenue figures in coming weeks through a quarterly regulatory filing. Third-quarter results showed a 39% decline in U.S. revenue while the company’s overseas business was growing.

Tesla deliveries in the U.S. rose an estimated 11% in the U.S. last year, according to Edmunds, an online website that tracks auto sales. The Model 3 outsold traditional gas-powered competitors in the compact, luxury- car segment.

The record fourth-quarter global deliveries, which the company reported earlier this month, helped propel Tesla’s share price to new heights and a total market value that exceeds all auto-making rivals but Toyota Motor Corp. The electric-car maker sells a fraction of the vehicles that giants such as General Motors Co. and Volkswagen AG do.

David Whiston, an analyst for Morningstar Research Services, said the latest results had “lots of positives and not much negative right now.” But, he cautioned, “the stock seems priced for perpetual perfection and that tends to eventually not end well.”

Tesla should get another boost beyond the Model Y. The company on Wednesday reiterated that production should begin this year of the Semi, an all-electric semitrailer truck revealed in 2017. Tesla also said Model Y production would begin in China in 2021 and deliveries of vehicles from a new plant near Berlin should start the same year.

Write to Tim Higgins at Tim.Higgins@WSJ.com

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The market has gone crazy. Tesla at that value becomes worth more than Ford and VW. That makes me skeptical. Boeing should be in the dumpster but the market does not seem the least bit concerned with lawsuits and lost or delayed orders. I keep waiting for a correction but it never happens.

quote:

Originally posted by PD:
The market has gone crazy. Tesla at that value becomes worth more than Ford and VW. That makes me skeptical. Boeing should be in the dumpster but the market does not seem the least bit concerned with lawsuits and lost or delayed orders. I keep waiting for a correction but it never happens.

I hear you.

JNJ faces over 100,000 lawsuits.

Think about that. Not a thousand. not 10,000. 100,000 lawsuits. Doesn't seem to dent the stock.

it took a bit of a hit about a month or two ago but now back up around $150 / share. Having $80+ BILLION in annual revenue helps obviously.

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I heard the same arguments 25 years ago from my broker at Bache ,outlining point by point why Wal Mart was a great short. Billions have been lost shorting Tesla, just as millions were lost shorting “ a bunch of hicks from Arkansas”.

quote:

Originally posted by PD:
The market has gone crazy. Tesla at that value becomes worth more than Ford and VW. That makes me skeptical. Boeing should be in the dumpster but the market does not seem the least bit concerned with lawsuits and lost or delayed orders. I keep waiting for a correction but it never happens.

The only reason Boeing isn’t in the crapper is because their only competition is airbus and they are the only two major airliner manufacturers in the world and they both have a backlog of orders for aircraft. If they were an automaker the only way they would survive their current troubles would be to go to the taxpayers for a handout like Garbage Motors.

When did Wallmart have a PE over 60? Apples to oranges. The great thing about our economic system is that if you think a stock is a good buy, you can buy it, if you think it is overvalued you can short it. I wish tesla shorts and the tesla longs good fortune. Only time well tell who will win the Tesla game, but I will be on the sideline because I am not smart enough to know better.

I wouldn't be surprised if some company like Toyota buys Tesla. But it would have to crash first.

Someone, maybe here, posted an analysis of the Model 3 buy and auto industry expert. His take was that the electrical drive system was very good, but the automotive construction was very inefficiently done. So if Tesla crashes, one of the big players will buy it for it's expertise in the electrical side of electric cars, and fold it into their more efficient automotive design and manufacturing.

quote:

Originally posted by Stlhead:
When did Wallmart have a PE over 60? Apples to oranges. The great thing about our economic system is that if you think a stock is a good buy, you can buy it, if you think it is overvalued you can short it. I wish tesla shorts and the tesla longs good fortune. Only time well tell who will win the Tesla game, but I will be on the sideline because I am not smart enough to know better.

Actually Walmart’s high PE for the last 13 years is 60.37. To the point, it is foolish to bet against generational thinkers who are the founders of said enterprises.

You would have been right, but according to the German car companies, at least in a Der Spiegel, article I read, they are concerned that they cannot compete with the electric drive train advances, and they will be reduced to coach builders - and that, frankly, would be great.

German bodies, with American motors, would have been vastly better cars. (Euro laws always messed up its performance cars. Too small displacements, which lead to complications and inefficiency.)

How many months was Wallmart's PE over 60? How many years has tesla actualy had earnings?Again, if you think tesla is a great buy then buy more, convince your friends to buy more, use your kids allowance to buy more, whatever floats your boat, but using wallmarts performance to show that tesla is a good buy is flawed. If you are long on tesla great, but if if you want to convince suckers like me to join you you need to give better reasons than you already have.

quote:

Originally posted by Stlhead:
... but if if you want to convince suckers like me to join you you need to give better reasons than you already have.

who is trying to convince you to buy TSLA ?

certainly not me

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quote:

Originally posted by Stlhead:
How many months was Wallmart's PE over 60? How many years has tesla actualy had earnings?Again, if you think tesla is a great buy then buy more, convince your friends to buy more, use your kids allowance to buy more, whatever floats your boat, but using wallmarts performance to show that tesla is a good buy is flawed. If you are long on tesla great, but if if you want to convince suckers like me to join you you need to give better reasons than you already have.

.

I think you are missing the point. When one makes a case that a particular stock might be a poor candidate to short, that particular statement does not mean that those companies are good long investments.

Does the government still subsidize every sale?

As of 12/31/2019, Tesla's vehicles no longer qualify for any of the up to $7,500 Federal income tax credit for purchasing an electric vehicle.