Finder makes money from featured partners, but editorial opinions are our own.

Why Tesla looks stronger than rival EV stocks

Posted:
News
EVChargerWirhGraph_Supplied_1800x1000-1

Here's why Tesla shares are faring better than its peers Rivian and NIO as persistent supply chain issues and Shanghai lockdowns cloud EV makers' prospects.

Shanghai lockdowns and persistent supply chain issues are muddying the outlook for electric vehicle makers, prompting many US analysts to cut their price target and earnings outlook on Tesla and its competitors.

The latest among them is Mizuho Financial analyst Vijay Rakesh who slashed his price target for Tesla (TSLA) to US$1,150 from US$1,300. He also lowered the target for Rivian Automotive (RIVN), to US$70 from US$80 and on NIO (NIO) to US$48 from US$55, MarketWatch reported.

The downgrade sent Rivian shares down 3.6% as of Monday's close in New York, while NIO's American depositary receipts (ADRs) fell 4.7%. Tesla slipped on the day, but by less than 0.5%.

The average analyst estimate for Tesla's second-quarter earnings has fallen to US$2.01 a share, from US$2.20 a month earlier, according to data published on the Wall Street Journal website. The EV maker's profit outlook has been worsening since three months ago, when analysts were expecting earnings per share to reach US$2.48.

But while its earnings outlook was clouded by supply chain issues and the lockdowns that curb output from its factory in China, the number of analysts who rate the stock a "buy" the stock rose to 23, from 19 three months earlier. Even those who recommend that investors increase their holdings to a level above the allocation set by indices, have risen to 5 from 4. Those who tell their clients to sell dwindled to four, from seven three months earlier.

Here's why the experts think Tesla will gain despite the sector's struggles.

Credit Suisse's thesis

Credit Suisse analysts Dan Levy and Trevor Young were among those who recently pared their earnings outlook and price target on the stock. They now expect the company's second quarter deliveries to reach 242,000, less than consensus of about 280,000, mainly due to the Covid lockdowns in Shanghai. They also cut the earnings outlook to US$1.10 for the second quarter.

That's not to say they're giving up on the stock. Far from it. In fact, they expect the company to outperform its peers in the EV race.

"Robust fundamentals ahead should outweigh the near-term challenges for Tesla such as the recent growth sell-off, production disruptions in China, lingering semiconductor shortage, and magnified inflationary pressures," the Credit Suisse analysts said in a note June 24.

Flexing Tesla's manufacturing prowess

Morgan Stanley also expects Tesla's volume to decline in the second quarter, but it sees the company making up for that shortfall through higher pricing and a ramp-up in output in the second half of the year.

"We'd buy weakness on a potentially weak 2Q print," the banks' analysts Adam Jonas, CFA, Evan Silverberg CFA CPA, Alexander Zoeckler said.

The company has the "historic ability" to significantly increase production/sales in the latter weeks of a given quarter, they said.

Tesla is expected to "flex its manufacturing prowess," aided by its accelerated ramp of Austin and Berlin, and deliver about 170,000 to 175,000 units in June, slightly below the estimated 180,000 units delivered in March, Morgan Stanley analysts said.

Technical signals support the bullish view

TradingView's technical analysis and Argus Research's quantitative report agree that Tesla is a buy, even on a day when the stock is down almost 1%.

TradingView's "buy" signal factors in moving averages and oscillators for a real-time overview. The 4-hour indicator, a snapshot taken at 3:07 p.m. New York time Monday, shows 11 gauges signaling the stock is a "buy" while six say "sell". The remaining 9 are neutral.

Argus's A6 algorithm is designed to capture and analyse financial trends for each company under coverage. Based on these metrics, Argus expects Tesla shares to rally to US$958, signaling a 30% upside potential for the stock. It expects a 151% gain in the company's three-year revenue and a 34% rise in gross margin.

Ready to open an account or considering a new broker? Find the best online brokers for your needs. Or check out fees and features in our comparison table to find a better deal today.

At the time of publication, Luzi Ann Javier doesn't own Tesla shares.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs comes with a higher risk of losing money rapidly due to leverage. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

Get more from Finder

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and 6. Finder Group Privacy & Cookies Policy.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
Go to site