We see Tesla (TSLA) as the undisputed leader in the electric vehicle (EV) industry despite growing competition. We view the selloff in TSLA shares as overdone and believe that it offers investors a favorable buying opportunity, underscores Bill Selesky, an analyst at Argus Research.
On Jan. 25, Tesla reported an adjusted 4Q22 net profit of $4.106 billion or $1.19 per diluted share, up from $2.879 billion or $0.85 per share in the prior-year quarter. EPS missed our estimate of $1.24 but beat the consensus of $1.13.
The higher earnings reflected higher automotive revenue (and gross profit) and growth in both overall production and vehicle deliveries. Tesla also benefited from higher average selling prices and higher earnings in its Energy Generation and Storage business.
We are lowering our 2023 EPS estimate to $4.39 from $6.19, reflecting management’s expectations for challenging automotive market conditions this year. We are also lowering our revenue estimate by 5% to $104.9 billion. The current consensus EPS forecast is $4.41.
We are initiating a 2024 EPS estimate of $6.14, implying 40% growth from our 2023 estimate. This estimate assumes significant contributions from the company’s new trucks. The 2023 consensus is $5.80.
We expect semiconductor shortages and raw material cost inflation, which weighed on results in 2022, to gradually diminish in 2023, and look for continued growth in revenue and earnings.
We also expect the opening of the company’s Supercharger Network to non-Tesla vehicles to become a meaningful source of revenue over time. We note that supercharger is the largest fast-charging network in the world, with 4,678 stations in operation at the end of 4Q, up 35% from the prior year.
We note that Tesla appears likely to begin stock buybacks in 2023.
Investment Thesis: We are reaffirming our BUY rating on Tesla with a revised target price of $257, reduced from $374. Our lower target reflects the recent re-rating of high-multiple growth stocks and the fallout from Elon Musk’s acquisition of Twitter.
