Tesla: Strong June Production Confirms the Bull Thesis, Says 5-Star Analyst

·2 min read

It did not come as much of a surprise to learn Tesla’s (TSLA) deliveries in 2Q22 dropped to their lowest level since 3Q21.

Given Covid restrictions saw the Shanghai plant shutdown for 2 months in the quarter, on top of supply chain snags and chip and parts shortages, total deliveries hit 254,695. While the figure amounted to a 26.5% year-over-year increase, it represented about 18% drop compared to 1Q22’s deliveries of 310,048 units and also came in well short of the total deliveries made during 4Q21 (308,000 vehicles). Total production for the quarter hit 258,580.

Wedbush's Daniel Ives reckons the China shutdown was behind a wipeout of roughly 70,000 units in the quarter. “Importantly,” the 5-star analyst went on to say, “Tesla noted in the press release that the month of June was the strongest production month in the company's history, a significant comment that will be viewed positively by the Street.”

Ives believes that on account of the China headwinds and global supply chain issues, expectations have been lowered regarding the potential for this year’s haul. The “bogey” for 2022 deliveries at the start of the year stood between 1.5 million to 1.6 million units (with a “stretch goal” of 1.7 million), but now it is more likely the company will be able to deliver around 1.4 million units this year.

The focus now turns to 2H and barring no other major issues regarding China’s zero Covid policy, Ives thinks deliveries are likely to show a 40%-50% uptick from 1H. Furthermore, the Giga Berlin and Austin factories are now in “significant ramp mode,” which for 2023 and onwards should result in “significant production capacity expansion.”

What does it all mean for investors? According to Ives, the recent headwinds are already “baked into the stock” following the shares’ weak performance -- down by 37% year-to-date. As such, Ives rates TSLA an Outperform (i.e., Buy), while his $1,000 price target stays put too. The figure represents one-year upside of 51%. (To watch Ives’ track record, click here)

Ives sits on the bullish end of the TSLA spectrum and not all other analysts are quite as confident. While 15 others recommend loading up on shares, 8 remain on the sidelines while 6 others implore to Sell, all culminating in a Moderate Buy consensus rating. Considering the average price target clocks in at $899.86, the stock has room for 32% growth over the coming months. (See Tesla stock forecast on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.