Analysts Express Optimism Ahead of Tesla's (TSLA) Upcoming Earnings Report

Anticipation is building as Tesla, Inc. (TSLA) prepares to release its fourth quarter 2021 earnings on January 26. Demonstrating resilience throughout the pandemic, Tesla adeptly navigated the automotive industry's chip shortage by adjusting its production strategies. The company also inaugurated two new manufacturing plants and achieved record-breaking electric vehicle deliveries. Notably, Tesla was the top-selling electric vehicle brand in Europe in 2021. Reflecting this strong performance, analysts are projecting impressive results for the upcoming earnings call.

Highlights

• Analysts have issued positive forecasts ahead of Tesla’s earnings release.
• Expectations are that Tesla will outperform analyst estimates, with elevated price targets reflecting anticipated growth.
• However, a Bank of America report suggests Tesla may lose U.S. EV market share in the near future.

Optimistic Outlook

During the pandemic, Tesla's stock surged due to record deliveries and supportive government policies promoting electric vehicles. Although momentum slowed somewhat last year, many analysts still predict upward movement.

Dan Levy of Credit Suisse anticipates Tesla will exceed expectations, raising his price target from $830 to $1,025. He projects earnings per share (EPS) of $2.81 for Q4, above the consensus estimate of $2.25.

Levy identifies four key drivers for Tesla's growth: expanded production capacity, improved gross margins, innovative battery technology, and new production announcements. Tesla currently excels in all areas, with new factories gearing up and advanced battery chemistries in development. Its operating margin, already leading among EV makers, is expected to improve further as production scales up.

Despite the positive outlook, Levy rates Tesla shares as Hold, citing a high trailing 12-month price-to-earnings (P/E) ratio of 325.37, indicating potential overvaluation.

Levy's price target is conservative compared to others. For instance, Piper Sandler’s Alexander Potter sets a $1,300 target, recently increasing delivery forecasts to 1.53 million units for 2022, up from 1.38 million. Potter also raised margin expectations, anticipating Tesla will continue to outperform profitability estimates due to strong volume and software revenue growth.

Potter emphasizes that Tesla's new factories will support growing vehicle demand. He believes Tesla’s market share is primarily constrained by production capacity, which is set to expand in 2022. However, he notes that rising interest rates could impact the company’s cost of capital. Potter maintains an Overweight rating on Tesla stock.

Jefferies analyst Philippe Houchois shifts the narrative to Tesla’s expected market share gains this year, rather than just the EV market opportunity. He states that upcoming earnings are pivotal in confirming Tesla’s ability to capture significant share from traditional automakers ramping up electric vehicle production, as well as securing a disproportionate share of industry profits.

Houchois holds an Overweight rating with a $1,400 price target.

It is important to consider that these optimistic assessments hinge on Tesla expanding its market share as electric vehicle adoption accelerates. Contrarily, a Bank of America research report forecasts Tesla's U.S. EV market share dropping from 69% in 2021 to 19% by 2024, despite EV sales tripling from 1 million in 2022 to 3 million in 2024. The report identifies Ford Motor Company (F) and General Motors Company (GM) as key beneficiaries of market share gains.

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