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Tesla (NASDAQ:TSLA) appears to be finally regaining the trust of investors as its shares trade nearly 10% higher early on Thursday following the company’s Q4 earnings release late last night.
Here’s a Morgan Stanley analyst with a point-by-point explanation of what exactly there is to like about the EV maker’s latest report:
1. Worries about demand: “Management just told us demand was 2x production.”
2. Worries about pricing: “Management said Tesla has been raising prices again (slightly) and that the cuts on the website do not drop 1:1 into the FY23 ASPs due to order backlog, timing, and other factors.”
3. Worries about forward volumes: “The company reiterated the long-term 50% CAGR target and expects FY23 deliveries of around 1.8mn units which embeds lingering supply chain issues. Management believes 2mm is possible if supply improves.”
4. Worries about the effects of lower pricing on future margins: “Management expressed confidence in gross margins at 20%, alleviating the bear case. They also discussed potential cutting offsets and rolling off of inefficiencies burdening FY22, suggesting OP margin is more resilient.”
Despite the many positives, the analyst maintains an element of caution about fiscal year 2023 as he sees “auto price inflation turns to deflation compounded by continued macro and geopolitical uncertainty.”
He further notes “background risk of ‘company specific’ idiosyncratic and sentiment-related factors that can also swing this historically volatile name in both directions.”
Nonetheless, Morgan Stanley reiterates an “Overweight” rating on shares with $220 Price Target and names the stock a “Top Pick,” believing Tesla “can leverage its cost leadership in EVs to aggressively expand its user base.”
TSLA is currently trading around $158, with shares up over 46% YTD.
