Tesla earnings: Wall Street weighs in following monster quarter

Tesla (TSLA) stock rocketed higher on Thursday on the back of several positive disclosures from the EV maker in its third quarter report.

From a Q3 profit beat and improving margins to an improved growth outlook, cheap EV update, and robotaxi rollout, there’s plenty for analysts to chew on for a company whose shares, even including today’s big move, are only up 2% for the year.

Bank of America’s John Murphy upped his price target on the back of Tesla’s strong quarter.

“We are raising our EPS estimates slightly due to improved gross margin in 3Q24 as a result of lower [raw material costs], Cybertruck ramp, execution/cost cutting, reg credits, and higher volume,” Murphy wrote in a note published Thursday morning.

Murphy was pleased to see auto gross margin strength, with Energy and Services (where Tesla sees sales doubling in 2025) tracking above estimates. As a result, Murphy hiked his price target to $265 from $255 and maintained the firm’s Buy rating.

Looking ahead, Murphy and BofA see a “well positioned” 2025, with a “second growth wave” on the horizon for Tesla.

“The bottom-line [from positive commentary on the earnings call] was that Tesla is charging up for the next wave of growth,” Murphy said. “[M]anagement’s sees unit volumes to materially step up by 20-30% in 2025. This radical change is likely to be fueled by the expected production start of a more affordable vehicle in 1H25 (more likely 2H25) and the Cybercab.”

Murphy also noted that Tesla saw an uptick in full self-driving (FSD) adoption following the company’s Oct. 10 Robotaxi event and positive developments with the 4680 battery, which he sees as “the most competitive battery in the US” in terms of cost level.

Morgan Stanley’s Adam Jonas homed in on CEO Elon Musk’s prediction that Tesla volume growth could hit 20% to 30% in 2025, which Musk caveated as a “best guess.”

Musk’s target “clearly depends on the company’s ability to improve affordability through cheaper model (next gen) introduction, financing offers, and improved features,” Jonas wrote in a note to investors.

Morgan Stanley and Jonas are now projecting a 14% annual growth rate (2.07 mm units) for 2025, which would be taking the expected Q4 delivery total and annualizing it, equating to around 510,000 to 520,000 units delivered in Q4.

Jonas and the Morgan Stanley team see Tesla’s quarter as one that had investors focusing on lowering vehicle costs and growing the auto business profitability over trying to value Tesla’s shift to AI and other ventures. Tesla remains a “top pick” for Morgan Stanley, with a $310 price target.

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Edison Yu of Deutsche Bank called Q3 margins “impressive” in both the auto and energy business and saw Q4 deliveries rising 11% sequentially, which would be a huge quarter-over-quarter move.

Like other analysts, the 20% to 30% volume growth projected by Musk was “materially above our/consensus expectations,” with the cheaper EV supporting that growth with a launch in the first half of 2025. Combining that news with the incremental info on Cybercab and robotaxi testing “fueled more debate” on the merits of that business line going forward.

“Our view continues to be that Tesla is well positioned as a technology platform to leverage end-to-end AI into a leading position in autonomous driving and humanoid robotics,” Yu wrote, reiterating the firm’s Buy rating and $295 price target.

One of the most bullish Tesla analysts on the street, Dan Ives, was very impressed with Tesla’s quarter, which he dubbed an “early Christmas present” for investors.

“I think it’s margins, margins, margins,” Ives told Yahoo Finance, with that being the main driver behind Tesla’s monster stock move today. “Look at their cost of goods, their ability to produce cars is down ultimately 30% to 40%, and could be down another 20%, 30% when you look at next year … What we’ve seen on margins, the renaissance of growth now is I think heading into 2025.”

Ives says that margin story merges with Tesla’s AI and autonomous offerings, as well as other growth drivers that will eventually lead to a trillion-dollar-plus market cap.

“We could be in a Cybercab in the next two to three years, so we’re not talking about something that’s five, 10 years down the road. This is something that will over the coming years become a reality,” he said.

Ives added, “This is going to be the next stage of growth, autonomous FSD, AI, but it comes down to you need the deliveries, you need the margins. They’re checking every box.”

Ives came away deeply impressed by the earnings conference call, claiming it was Musk and Tesla’s best in a number of years.

Ives and Wedbush maintained their Tesla Outperform rating and $300 price target.

Pras Subramanian is a reporter for Yahoo Finance. You can follow him on X and on Instagram.

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