Tesla, the electric car giant led by Elon Musksurprised the markets with a quarterly and an outlook that challenges the bears on the stock. Title in strong comeback since the beginning of the year, after being sunk in 2022 by a powerful sell-off, which led it to collapse by 65%on concerns about the strength of demand for Tesla cars.
On the occasion of the publication of Tesla’s accounts, we interviewed Dan IvesManaging Director Wedbush Securities to take stock of the numbers for 2022 and the prospects for 2023.
Dan, do you think the price cuts on Tesla cars announced yesterday by Elon Musk will be enough to boost demand?
I think this was the right move, cutting prices could push orders up another 10-15%. China is very important is the cornerstone of Tesla’s success. Defending that territory is essential. And I think right now we see demand outpacing production. What Musk communicated was exactly what investors wanted to hear. And he also outlined realistic delivery numbers.
It’s been a very difficult 2022 for Tesla stock but now we’re starting to see the light at the end of the tunnel. And Musk dons the superhero suit once again.
We have observed something very interesting on the one hand Tesla has published record numbers for both Q4 and for the full year 2022, but over the course of the year the stock has lost approximately 675 billion dollars of its market value. Can we say that Twitter was Tesla’s main problem?
I think 70% of the sell-off that Tesla experienced in 2022 was due to Twitter. Sales on the stock have declined year-to-date and fundamentals are returning to tell the narrative I’ve always believed, that Tesla is the most transformative corporate story ever. And this is why Musk’s call with analysts yesterday was fundamental in being able to communicate the plan to cross the difficult macro context in 2023.
After yesterday’s mostly above-expected numbers, my eye was on cash flows at $1.42 billion versus $2.13 billion estimates. Is that a cause for concern?
Look, I mean, Tesla is in “massive build” mode. What they are doing in terms of production in the Berlin factory and now also in Nevada is impressive and it is clear that cash flows are going to be a bit erratic. But I think Wall Street understands that they are making an effort that they will benefit from in the long run.
So do you think the worst for the title is in the past?
Yes, I believe 2022 has been a year of depression. Obviously a horrible year. And it was self-inflicted pain from Musk’s situation with Twitter. Now back to a positive narrative though, the fundamentals are great, according to their estimates deliveries will grow 40% in a pre-recession environment. This is the time for Tesla to go on the offensive is the year of innovation and I think that’s what investors will focus on.
Tesla stock is hovering around $145 per share. Is the current price right or is the stock still at a discount?
Our price target on Tesla is $200 a share we like the risk reward. And look, the haters will still hate the stock, but our rating on Tesla is buy.
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