I posted this to my Subscribers earlier this morning before the open.
TSLA’s poor 1Q results proved already discounted in the stock as investors overlooked big misses on earnings, revenues and free cash flow, and instead focused on the company’s future product pipeline for more affordable vehicles and the upcoming autonomous ride hailing test in Austin, which remained on track for the end of 2Q. We remain skeptical of the company’s plans to introduce more affordable vehicles that are essentially scaled down Model Ys rather than a new form factor that expands TAM. Our caution stems from TSLA’s experience in 2023, when 20% price cuts added little or no incremental volume. We believe FY’2025 delivery estimates will continue to be reduced (to -5% to -8% YoY from +1%-2% currently) as a result of the dismal 1Q deliveries (-13% YoY) and weak 2Q delivs to date. In yesterday’s earnings, the company did not reiterate that FY’2025 deliveries would return to growth. Musk’s announcement that he’d scale back his DOGE activities and spend more time at TSLA should limit further brand damage.We are reducing our $Tesla(TSLA.US) price target to $310 (from $380) to reflect our reduction in 2030 adj earnings to $12. We attach a 2.0x PEG to post-2030 EPS growth of 25%, which equates to a 2030 value of $600. At a 14.2% cost of equity (4.0% risk free rate, 6% equity risk premium, 1.7x beta), that equates to a present value of $310.The copyright of this article belongs to the original author/organization.
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