Tesla Crushes Earnings Estimates. Wall Street Is ‘Speechless.’

Tesla Crushes Earnings Estimates. Wall Street Is ‘Speechless.’

Tesla beat Wall Street’s first-quarter financial estimates with a stick, and the stock was rising as analysts pile praise on report.

Shares of Tesla were up about 12% at points on Thursday. Shares closed up 3.2% at $1,008.78, losing ground along with the market after comments from Fed Chair Jerome Powell made it clear that interest rates are headed higher, fast. The S&P 500 closed down 1.5% and the Dow Jones Industrial Average fell 1.1%.

“I am already speechless,” tweeted out New Street Research analyst Pierre Ferragu, shortly after results were released. He was impressed with Tesla’s roughly 29.5% automotive gross profit margin reported for the first quarter. That was an increase from the roughly 29% profit margin reported for the fourth quarter of 2021.

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Margins improved even as raw material inflation was a headwind for Tesla and other auto manufacturers. Cost-cutting and higher vehicle average selling prices led to the margin surprise.

Ferragu also commented on competition, pointing out a chart in Tesla’s earnings report. Tesla had a big day for orders after the Super Bowl, when other auto manufacturers were advertising their EVs. Tesla actually benefited from others’ advertising.

Ferragu rates shares Buy and has a $1,580 price target for the stock. Wedbush analyst Dan Ives is also a bull, rating shares Buy. His price target is $1,400 a share. Ives called results “Cinderella-like” with strong numbers produced against a “brutal supply chain backdrop.” Looking ahead, he is still focused on China. Tesla’s Shanghai plant was shut for weeks because of local Covid restrictions. The plant has restarted and Ives hopes it stays open, which will require Tesla suppliers to ramp production back up too.

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“We commend the execution,” wrote Cowen analyst Jeffrey Osborne in his research report. He was impressed Tesla still expects to grow delivery volumes at least 50% in 2022, despite supply-chain headwinds. He isn’t a bull though, rating shares Hold. His target price is $790 a share.

We “are less enthusiastic about the stock at current valuation given likely peak gross margin,” added the analyst. He fears margins might be as good as they get.

J.P. Morgan analyst Ryan Brinkman isn’t a Tesla bull either, rating shares Sell. He did raise his price target after earnings to $395 a share from $330. He called results strong, but pointed out that part of the earnings beat was driven by higher-than-expected regulatory credit sales. Tesla generates revenue by selling credits earned by selling more than its fair share of low-emission vehicles. Credit sales totaled $679 million in the first quarter. Wall Street expected $312 million.

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Credit sales were a boost, but Brinkman pointed out those extra sales only made up about half of the earnings surprise. Better-than-expected operating performance made up the rest.

Another Sell-rated analyst is Citigroup ’s Itay Michaeli. Similar to Osborne, he commended the strength of the quarter and Tesla management’s execution, but remains cautious due to valuation. And similar to Brinkman, Michaeli raised his price target to $375 a share from $313.

More analysts notes are out or will come. Most will probably give Tesla credit for a great quarter, regardless of what the analyst ratings are.