Tesla Earnings Stun: Stock Soars, Biggest Gain in Decade, 40% Drop or Rise?
Tesla's exceptional earnings boost in the third quarter has shocked the market, with the stock closing up 21.9% on Thursday following the release of its financial report, marking the largest single-day gain since May 2013. However, Wall Street institutions are deeply divided on the future trajectory of Tesla's stock price after the earnings report, with some being extremely bullish, even predicting a stock price increase of over 40%, while others are more cautious, believing that Tesla has not yet addressed long-term growth concerns and even predicting a nearly 40% decline in the stock price in the future.
The bullish camp clearly includes the staunch Tesla bull, Wedbush analyst Dan Ives. He has given Tesla an outperform rating, setting a 12-month target price of $300, which implies an expected increase of 40.4% in Tesla's stock price compared to Wednesday's close. Ives stated that the increase in profit margins in the third quarter "clearly indicates that Tesla continues to focus on profitability while balancing future plans."
Ives said:
"Now that price cuts are completely in the past, we believe that for Wall Street, this is a key factor in proving Tesla's ability to improve profit margins as it continues its AI/FSD transformation in the coming years. After a turbulent 2024, the much-needed improvement in profit margins will have bulls cheering in this quarter."
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Piper Sandler analyst Alexander Potter has given Tesla an overweight rating, with a target price even higher than Ives, reaching $310, implying an expected increase of 45% in the stock price compared to Wednesday's close. Potter commented that Tesla's third-quarter report "surprisingly performed well in almost every aspect," and even if the company's own expectations prove to be optimistic, there is still "room for growth."
Canaccord Genuity analyst George Gianarikas raised Tesla's target price by $24 to $278, expecting a 30% increase compared to Wednesday's close. Gianarikas summarized Tesla's financial report as a "story of accelerating revenue and earnings growth in the product cycle," and mentioned some positives, such as Tesla stating that it will start producing ultra-low-cost vehicles next year, while planning to produce about 2 million autonomous taxi vehicles, the Cybercab, for the Robotaxi business in 2026.
Truist Securities analyst William Stein gave Tesla a hold rating, slightly raising the target price from $236 to $238, which implies an expected increase of about 11.4% in the stock price compared to Wednesday's close.
Stein believes that Tesla's reported earnings growth is due to strong profit margin performance, but also points out that Tesla did not provide detailed information about its 2025 models, no detailed information about the improved full self-driving system FSD, and no detailed information about the Optimus humanoid robot plan.
The representative of the bearish side is JPMorgan analyst Ryan Brinkman. He emphasized that while investors may be excited about Tesla's extraordinary earnings growth, the catalysts driving this stock price increase cannot be considered long-term growth factors. He advises investors not to place too much importance on Tesla's stock price "surge" immediately after the earnings report, believing that the market movement brought about by the performance report is "unsustainable."
Brinkman pointed out that Tesla's earnings and cash flow improved in the third quarter, and several drivers behind these achievements are unsustainable. These include the so-called "selling carbon" income from selling carbon emission credits and unusually high operating capital gains.Therefore, Brinkman maintains his underweight rating on Tesla unchanged. He raises his target price for Tesla from $130 to $135, which, despite a 3.8% increase, is still 36.8% lower than Tesla's closing price on Wednesday, implying that he expects Tesla's stock price to drop by nearly 37% from Wednesday's level.
TD Cowen analyst Jeff Osborne assigns a hold rating to Tesla with a target price of $180. This target price suggests an expected stock price decline of nearly 15.6% from Wednesday's close. Osborne points out that Tesla's third-quarter performance was driven by strong gross margins and mentions that the company's new car launches are still on track for a smooth rollout in the first half of next year.
Wolfe Research analyst Emmanuel Rosner assigns a sector perform rating to Tesla, believing that two key factors are needed for Tesla's stock price to continue rising: confidence in the re-acceleration of growth in the automotive business and confidence in achieving full self-driving capabilities. He adds that on these two points, Tesla's management appeared very confident during the third-quarter earnings call.
Additionally, Morgan Stanley analyst Adam Jonas assigns an overweight rating to Tesla, with a target price of $310, the same as Potter's, and believes that the third-quarter performance "may mark the bottoming of automotive profitability expectations." However, as Wall Street Journal mentioned earlier, Jonas and other Morgan Stanley analysts raised questions about whether growth concerns have truly been alleviated.
These analysts list a series of market concerns that remain unresolved in their reports, including the direction of Tesla's capital expenditure growth, the proportion of AI in capital expenditure, and the return cycle; Tesla's development path in autonomous driving, government certification, and insurance before launching full self-driving technology by 2025; whether there will be any anomalies in the fourth quarter that prevent the realization of profit margin expectations; and the source of the expected growth of energy storage systems by more than 180% in the fourth quarter.
Goldman Sachs analysts, including Mark Delaney, raise their target price for Tesla from $230 to $250, implying an expected stock price increase of 17% from Wednesday's close. These analysts maintain a neutral rating on Tesla but question whether Tesla can achieve its FSD performance and vehicle delivery growth targets by 2025, as well as the sustainability of its gross margin.
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