Yahoo Finance's Pras Subramanian discusses Wall Street's attitude toward Tesla stock going into the company's earnings.
RACHELLE AKUFFO: Well, it's no secret that Tesla had a rough year, facing production delays in China and, of course, Musk's Twitter backlash. However, that doesn't seem to deter analysts who follow the EV giant, with Wall Street seeing Tesla as a buy ahead of earnings. Well, here with the details is Yahoo Finance's Pras Subramanian. Pras, it's hard for people not to be bullish on Tesla for some reason.
PRAS SUBRAMANIAN: Yeah, Rachelle. There's always a lot of excitement for that stock. But just turning to, sort of, the stock performance of last year, it's just down so much that, for analysts, they kind of just see upside from here. Like, we've been looking-- we've been tracking some of these numbers. 57% of analysts, according to Bloomberg, have a buy rating on the stock right now, ahead of earnings tomorrow night.
So, you know, we talk about this possible bounce back here. We've seen the shares kind of move up higher already in 2023. But beyond the rating, what's more important for analysts here are things like gross margins, right? You know, you have analysts like Toni Sacconaghi at Bernstein who were concerned about margins shrinking because of those price cuts, which happened in Q1. So we won't see that reflection in Q4 but might hear about it in terms of guidance.
Other analysts, like Canaccord's George Gianarikis, who you guys had on yesterday, talking about how margins aren't that important because it's actually all about growing their market share. And they can do that because they can cut prices and also use, kind of, the cheaper component prices that they've been seeing recently and, also, sell high-margin products like FSD-- or full self-driving-- that will allow them to, sort of, recoup some of that margin.
Also, another thing to watch is, of course, volume and deliveries. Tesla has had a long-term target of 50% CAGR growth rate for deliveries. Some analysts, like Dan Ives, think that's unrealistic given the fact that would mean 2 million cars delivered by the end of 2023. When you have only four factories there, making 500,000 units per factory is a lot to do in one year.
Ives says that Tesla and Elon Musk should come clean and cut that and make it a bit more reasonable, and that will assuage, kind of, investor concerns about Tesla going forward.