Tesla (TSLA.O) shares rose 6% on Monday after better-than-expected quarterly deliveries proved CEO Elon Musk’s bargaining strategy worked.
Based on premarket share changes, the leading U.S. electric vehicle manufacturer would boost its market capitalization by $50 billion to $900 billion.
At $277, the stock has more than quadrupled this year and risen far over analyst price forecasts, causing some brokerages to warn that aggressive discounting may hurt profitability.
The company delivered 466,140 automobiles in April–June, up 10% from the previous quarter and 83% from a year earlier, thanks to price reduction. Tesla delivered 13,560 cars in the second quarter, down from 17,933 in the first.
“Tesla’s price cuts are working in a big way,” said Deepwater Asset Management managing partner Gene Munster. The prior seven quarters saw 50% delivery growth. Growth increased this quarter.”
At least three analysts boosted their stock price targets, saying Tesla’s annual delivery target of 1.8 million vehicles now seemed conservative after delivering half of that in the first six months of 2023.
The median stock price estimate is $210, 20% below its closing price. Tesla’s projected price-to-earnings ratio is 62.9, well above Ford’s 8.82 and Amazon.com’s 62.66.
“The key question for investors is what might margins be,” Bernstein analyst Toni Sacconaghi wrote.
“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.”
First-quarter gross margin was 19.3%. Wall Street anticipates a drop to 18.6% when the business announces second-quarter results on July 19.
Despite margin pressure, few analysts expect the stock to rise as Tesla gains market share abroad and its charging method approaches U.S. standardization.
“Our money’s on Elon,” said Canaccord Genuity analyst George Gianarikas, who raised Tesla’s price objective by $36 to $293.
