Tesla Inc (NASDAQ:TSLA) has fared better than feared and “the sky in not falling” for the electric vehicle (EV) maker, according to a report from Canaccord Genuity (TSX:CF, LSE:CF).
Analysts at the firm maintained a 'Buy' rating for the stock and kept its price target unchanged at $275 per share in a report released Thursday, saying Tesla’s fourth-quarter earnings met their expectations.
“After a rough end to 2022 centered on worries about demand, margins, and Twitter, Tesla's earnings report should help to ease investor concerns and provide comfort that worst-case fears will likely not manifest,” the analysts wrote.
READ: Tesla beats on 4Q earnings and revenue thanks to higher vehicle deliveries and production improvements
The analyst noted that Tesla CEO Elon Musk recently cut vehicle prices to stimulate demand as the market enters a cyclical downturn, resulting in a rebound in demand. Gross margins, while declining, will not fall as aggressively as many feared, they added.
“Well, the price cuts worked. Despite the weakening auto market, Musk noted that Tesla is experiencing its strongest YTD order rate environment in history so far in 2023, with orders coming in at 2x the rate of production,” they said. “Orders have been so strong that Tesla has been able to raise the price of the Model Y marginally after the recent round of price cuts.”
For 2023, the analysts noted that Tesla has guided for 1.8 million vehicles to be produced, in line with consensus.
By seeding the market with units that are forward upgradable with full self-driving (FSD) software — which contributed $324 million to the top-line in 4Q — they said Tesla is creating a sea of future margin potential out in the marketplace.
Tesla’s shares were trading 8.4% higher at $156.56 shortly before noon in New York on Thursday. The results were released after the closing bell on Wednesday.
Contact the author at stephen.gunnion@proactiveinvestors.com