By Michael Elkins
Jefferies reiterated a Buy rating on Tesla (NASDAQ:TSLA) and raised the price target on the stock to $230.00 (From: $180.00) following the electric vehicle maker’s 2023 investor day.
“After a harrowing H2, the Austin investor day demonstrated Tesla remains very much a "Day 1" company,” analysts wrote in a note. “Lack of new product unveil does not imply major growth delays in our view. Scaling up 3/Y further through dynamic pricing could limit the scope for earnings surprises in 2023/24 but benefit FCF and ROIC.”
According to Tesla’s investor presentation, the company aims to cut costs on NextGen platforms by up to 50%. A 50% reduction in unit NextGen COGS to c.$18k supports an ASP $25k+, gross margin 20% and EBIT margin in low to mid-teens. Analysts saw tangible progress on 4680 and dry electrode production, both critical to lower battery cell cost towards $70/Kwh and further roll-out of casting. Jefferies assumes NextGen SOP with streamlined "box process" assembly as early as H2 '24 given timeline of the company’s Mexican plant.
Jefferies raised 2023 EBIT margin estimates 10% to $15.3 billion, 14.7% margin and FCF $13.4B including WC reversal, with post-tax ROIC going from 40% to 60% by 2025. Analysts say that Q1 should be a trough with revenue of $23.1B, o/w autos $19.9B and $250M ZEV.
Shares of TSLA are down 1.09% in pre-market trading on Monday.