Tesla (TSLA) stock rolled over to finish little changed after being up all day following three separate reports that gave the stock a boost.
Shanghai output improves
First off, came a report from Asia with the China Passenger Car Association reporting Tesla sold 32,165 China-made vehicles in May. This figure also includes 22,340 vehicles made for export to regions like Europe.
Tesla’s May output from the Shanghai gigafactory is more than triple the amount it made in April, as the COVID-19 shutdowns in Shanghai closed the factory for most of March and April. Despite the plant reopening on April 19, it still could not ramp up production to pre-lockdown conditions.
May’s output was still below normal levels for the Shanghai factory, though another silver lining for Tesla’s China operations and return to normalcy is the “closed-loop” system the company was employing is coming to an end.
The South China Morning Post reported the gigafactory will exit the “closed loop” on June 11, meaning thousands of Teslas can now resume commuting to the factory from home as opposed to living at the factory in nearby dormitories.
Musk sees ‘nutty’ end of quarter delivery waveElon Musk attends the opening ceremony of the new Tesla Gigafactory for electric cars in Gruenheide, Germany, March 22, 2022. Patrick Pleul/Pool via REUTERS
Back in the U.S., more positive news for investors came from CEO Elon Musk at a company-wide meeting last night. As the end of the quarter approaches, an employee asked Musk whether delivery cycles would ease, such that the company could avoid its now typical “insane end-of-quarter delivery push.”
EV blog electrek notes Musk said in response:
“This has been a challenge since late 2008. There always seems to be something that happens and causes the end of the quarter to be nutty and this quarter will not be an exception – mostly because we had this huge challenge with the COVID restrictions in Shanghai. It basically shut down the Shanghai factory for much of the early part of the quarter. It is only now getting back to full production. It will be pretty intense this quarter.”
Musk went on to say Tesla expects to have much smaller waves next quarter as Gigafactory Berlin ramps up and frees up capacity from Shanghai, evening out exports to Europe.
The positive for investors is the “insane” end of quarter delivery pushes usually result in big quarterly numbers for Tesla, meaning the company may surprise when it releases Q2 delivery numbers next month.
Last quarter saw the company hit yet another record delivery total of 310K, though the Street is expecting a lower figure this quarter of around 304K due to the COVID shutdowns.
UBS says buy TeslaTesla vehicles are shown at a sales and service center in Vista, California, U.S., June 3, 2022. REUTERS/Mike Blake
Finally, Tesla shares got a boost from Wall Street, with UBS analyst Patrick Hummel declaring it’s “time to be bold,” upgrading the stock to Buy from Neutral.
Though the stock is down around 35% year to date, Hummel believes operationally the company’s outlook through Q2 is stronger than ever due to
(1) record-high order backlog & two new gigafactories ramping up;
(2) margin momentum: after the Q2 dip, auto gross margin should structurally exceed 30%, driven by pricing and product & process innovation;
(3) a structural competitive edge in key supply chains, resulting in superior growth and profitability.
Within that Hummel is bullish on a few other areas. Hummel believes Tesla has “structural” advantages in its business, such as vertical integration in areas like chips, software and battery production. Looking further out Hummel sees the company’s “innovation pipeline” with news coming out on full-self driving and its humanoid robot, the Cybertruck, and ramp up curves steepening in Berlin and Austin as “share price drivers” going forward.
Finally, Hummel believes Tesla shares are a valuation call at this point, with today’s price an attractive entry point for getting into what he says is a “solid high-growth business.” Hummel is maintaining his $1,100 price target, suggesting a potentially healthy 47% upside from here.
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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