Tesla's third-quarter financial report shines, but Goldman Sachs and Morgan Stanley still have some "concerns".
On Wednesday, Eastern Time, Tesla released its third-quarter financial report, which exceeded market expectations: Tesla's revenue in the third quarter increased by nearly 8% year-on-year, still below expectations, but the profit was a pleasant surprise, with the gross margin rising by 195 basis points year-on-year to 19.8%.
In addition, Tesla expects a 20%-30% increase in vehicle deliveries by 2025 and anticipates that the safety performance of Full Self-Driving (FSD) will exceed human capabilities in the second quarter of 2025.
Under the surprise of the financial report, Tesla's stock price soared. On Thursday, before the US stock market opened, Tesla's stock price increased by more than 12%. But can this financial report dispel concerns about Tesla's growth in the long run? Goldman Sachs and Morgan Stanley are still cautious.
On Wednesday, October 23, Goldman Sachs slightly raised its target price for Tesla in the next 12 months, from $230 to $250, maintaining a neutral rating. Analysts such as Mark Delaney said that this financial report is a gradual positive signal, but Goldman Sachs is skeptical about whether Tesla can achieve FSD performance and vehicle delivery growth targets, as well as the sustainability of gross margin, by 2025.
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Morgan Stanley strategist Adam Jonas and others said that this strong financial report may mark the "bottom" of the automotive industry's profit expectations and sentiment, but whether Tesla's growth concerns have truly been alleviated remains to be seen.
Goldman Sachs: Tesla's long-term growth prospects are good, but there are still constraints.
Goldman Sachs believes that Tesla has a good long-term growth prospect, thanks to its leadership in the electric vehicle field, the breadth and depth of its technological capabilities in artificial intelligence, software, and hardware, and its ability to benefit from a full set of solutions, including charging and storage.
However, Goldman Sachs also sees some constraints:1) It is anticipated that the growth of FSD will take longer than Tesla's current target timeline;
2) It is believed that in the short term, the automotive fundamentals may remain volatile (a reduction in prices/diminishing incentives is a negative factor, and deliveries are expected to be slightly below Tesla's expectations for 2024/2025);
3) It is considered that the valuation is in place. Overall, we are increasing our earnings per share (EPS) expectations, primarily due to higher gross margins and increased regulatory credit revenue.
Morgan Stanley: Has Tesla's Growth Concern Really Been Alleviated?
In a report titled "Strong Gross Margins/Free Cash Flows Beat Expectations, Growth Concerns Alleviated?", Morgan Stanley raises a series of market concerns that remain unresolved:
What is the direction of Tesla's capital expenditure growth, how much of the capital expenditure is allocated to AI, and what is the return cycle?
What is Tesla's development path or the next milestone in terms of autonomous driving, government certification, and insurance before launching "unregulated" full self-driving technology in the fiscal year of 2025?
Will there be an anomaly in Tesla's profit margins in the fourth quarter that prevents the achievement of expectations?
The expectation for energy storage system (ESS) growth to exceed 180% in the fourth quarter, what is driving this growth, and how much does the price per kilowatt-hour need to decrease to achieve such growth?
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