Analysts call Tesla a 'must own' and 'core holding' following blowout first-quarter earnings

Published Thu, Apr 21 20226:49 AM EDTUpdated Thu, Apr 21 202211:54 AM EDT

Analysts are continuing to bet on Tesla despite ongoing pressures, seeing the electric vehicle company as a key stock play after showing blowout first-quarter earnings. Shares of Tesla rose 7% in premarket trading as investors reacted to a beat on the top and bottom lines for the electric vehicle company , driven in part by increased deliveries and rising average sales prices. Piper Sandler's Alexander Potter said the results show Tesla is a "must own" stock even amid the current macroenvironment, saying in a note to clients that any weakening impact on future results will likely be temporary. "Yes, there's uncertainty in 2H, and 2022 deliveries may be impacted by COVID lockdowns in China (among other things)," Potter wrote. "But so far, Tesla has successfully relied upon its operational prowess to navigate these hurdles while generating lots of cash (free cash flow was $2.2B in Q1)." Baird's Ben Kallo called Tesla a "core holding," mentioning in a note to clients that the company remains "one step ahead" of ongoing supply chain problems. But Kallo trimmed estimates for second-quarter deliveries amid the shutdowns in Shanghai. In the wake of the results, most analysts maintained previous price targets on the stock, with Bank of America's John Murphy saying the stock is "already priced to perfection." But RBC Capital Markets now thinks shares could see 20% upside from Wednesday's closing price. Some skeptical analysts are beginning to shift their views on the stock. Barclays' Brian Johnson said that Tesla's consistent earnings beats make it "frankly hard" for the bank's underweight case to be justified. "While we still consider TSLA's valuation excessive in building in assumptions of robots and robotaxis, it's hard to fight against strong near-term performance despite supply chain pressures — indeed, these pressures could make it easy to forgive any misses in the quarters ahead," he wrote. To be sure, some analysts in the underweight camp remain skeptical of Tesla's strong valuation. "While we are truly impressed with Tesla's execution and improving margin and cash flow profile, we continue to struggle to justify the company's valuation," wrote Bernstein's Toni Sacconaghi. JPMorgan Chase's Ryan Brinkman also noted that a large portion of the margin beat stemmed from a "one-time boost" from the credits Tesla sells to automakers. While the sale is "highly beneficial to current period results, they are not thought to as appreciably impact terminal value as the entire industry eventually electrifies," Brinkman added. Amid a broader tech market sell-off, shares of Tesla have fallen 7.5% this year and 9.3% since the start of the month.

Tesla Super Charger

Courtesy: Tesla

Analysts are continuing to bet on Tesla despite ongoing pressures, seeing the electric vehicle company as a key stock play after showing blowout first-quarter earnings.