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The
leading U.S. manufacturer of electric vehicles was set to
increase its market capitalization by around $50 billion to $900
billion, based on its premarket share moves.
At $277, the stock has already more than doubled in value this
year and risen far above price targets set by analysts,
prompting caution from some brokerages that margins will suffer
because of the aggressive discounting spree.
The price cuts helped the company deliver 466,140 vehicles in
the April to June period, up 10% from the preceding quarter and
83% higher from a year earlier. The gap between how many cars
Tesla produces and delivers also narrowed to 13,560 in the
second quarter from 17,933 in the previous three months.
"Tesla's price cuts are working in a big way," said Gene
Munster, managing partner at investment firm Deepwater Asset
Management. "The average growth of deliveries over the previous
seven quarters was 50%. This (quarter) marks a measurable step
up in growth."
At least three analysts raised their price targets on the stock,
saying Tesla's annual deliveries target of about 1.8 million
vehicles now seems conservative as it already handed about half
of that in the first six months of 2023.
The median price target on the stock stands at $210, which is
about 20% below its last closing price. Tesla has a forward
price-to-earnings ratio of around 62.9, far above Ford's 8.82
and near the 62.66 of Amazon.com.
"The key question for investors is what might margins be,"
Bernstein analyst Toni Sacconaghi said in a note.
"We continue to believe that Tesla will need to further lower
prices this year and/or next year to achieve its volume targets,
incrementally pressuring margins."
The company reported total gross margin of 19.3% in the first
quarter. Wall Street expects the measure to dip to 18.6% when
the company reports second-quarter results on July 19.
Despite the margin pressure, few analysts believe the stock
could move higher as Tesla works to gain market share globally
and its charging system closes in on becoming the U.S. standard.
"Our money's on Elon," said Canaccord Genuity analyst George
Gianarikas, who lifted his price target on Tesla by $36 to $293.
(Reporting by Aditya Soni; Editing by Shounak Dasgupta)
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