It’s another week, and Tesla earnings are wooing the bulls while the bears are erring on the side of caution. Meanwhile, General Motors' results have several institutional analysts buzzing.
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The siren call of Elon Musk
On Wednesday, October 23, Tesla's (TSLA) third-quarter earnings call largely reflected much of the same rhetoric and messaging that was present during Q1 and Q2: that Tesla is a company built on autonomy and robotics—a message that its CEO Elon Musk isn't afraid to parrot as often as he sees fit.
But even as he managed to disappoint some fans and some members of the automotive media by alluding to the possibility that a cheaper "Model 2" has been canned, many of the bears and bulls that follow Tesla's rights and wrongs had something to say based on the numbers and projections they were presented.
Related: Elon Musk is sending mixed messages about Tesla’s only lifesaver
On the bulls' side, Canaccord Genuity analyst George Gianarikas raised the price target on Tesla stock from $254 to $278.00. In a note shortly after the earnings call after the bell on the 23rd, he defends the maintenance of Canaccord's "Buy" rating on what he sees as Tesla's “quite good” margins and its overall “truly solid quarter.”
“A product cycle story with accelerating revenue and earnings growth. Margins were good, quite good, much better than expected and a standout for the quarter,” Gianarikas said in his note.
“The quarter was truly solid overall. Most of this strength (as we have written) was thanks to Tesla zigging, as the traditional auto OEMs zagged. A laundry list of OEMs experienced unexpected bumps in business during the quarter, primarily due to poor market conditions in China.”
Additionally, Bank of America analyst John Murphy reiterated his firm's buy rating and raised his price target from $255 to $265. He saw improved gross margins, higher long-term volume, and what he says is the "next wave of growth" in 2025 with the impending Cybercab and supporting infrastructure like the upcoming ride-hailing app and FSD software.
Tesla
Though he is positive about the supposed 20-30% increase in unit volumes in 2025 fueled by a more affordable vehicle, Murphy still doubts the Cybercab.
"Elon Musk reiterated the production progression outlook for the Cybercab, which management expects to start in 2025 and reach volume production in 2026. Elon Musk mentioned that the production volume target for Cybercabs is 2 million to maybe 4 million, however, it was unclear the timeline of this goal," Murphy said.
However, most evidently confident is none other than Wedbush's Tesla bull and Yankee fan Dan Ives. In a note published on Oct. 24, Ives reiterated its "outperform" rating on Tesla stock and $300 price target on what he characterizes as "an early Christmas present for investors."
"The bulls got a monster margin rebound and a surprisingly strong delivery outlook for 2025 which we would characterize as an Aaron Judge-like quarter and guidance."
He emphasized that a "myriad of growth drivers over the next few years" could fuel Musk & Co. into 2025 and beyond, including the supposed "affordable" model, future iterations of FSD, Tesla Semi, and Cybercab production, and its energy storage business.
"There is more wood to chop for Tesla and this recovery story still has some challenges ahead to convince the Street that 2025 will be a true inflection point year. That said, last night was the first major step on this recovery path and we believe was a seminal quarter for Musk and Tesla to prove the doubters wrong with a very bullish forecast for 2025."
But for every Dan Ives, there are also more cautious analysts who say that Tesla's avenues for growth can cause it to strike out at the plate in the playoffs, just like the real Aaron Judge.
In his note published on October 24, J.P. Morgan's Ryan Brinkman pointed to Tesla's near-record sales of regulatory credits as a booming but temporary source of income as the industry evolves.
In Q3, Tesla earned $739 million by selling credits it receives for producing electric cars to other automakers that don't meet government emissions requirements. The quarter before, it made $890 million from the same scheme. However, as these "loyal customers" make their own EVs, the market for such credits shrinks, which can put Musk & Co. into trouble.
"Investors should be cautious about capitalizing the earnings generated from these credits, given that one of the tenets of the Tesla bull case is the large-scale electrification of the automotive industry," the analysts wrote. "As other automakers broaden their electric offerings, they should over time be in a position to generate their own credits, negating and eventually eliminating the flow of competitor payments to Tesla."
JPMorgan rated Tesla stock as "Underweight" with a price target of $135 a share.
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However, a bit more positively, Goldman Sachs analyst Mark Delaney reiterated his firm’s "neutral" rating on Tesla stock while raising its price target from $230 to $250, seeing it as "well-positioned for long-term growth."
"We believe Tesla remains well positioned for long-term growth, given its leadership position in EVs; the breadth/depth of its technical capabilities in AI, software, and hardware; and its ability to benefit from a full set of solutions including in charging and storage," he said.
However, he does see some extreme caveats.
"These include: 1) We expect the ramp in FSD to take longer than Tesla currently targets; 2) We believe auto fundamentals could remain volatile in the near-term (with lower pricing/incentives a headwind, and we expect delivery volumes to be somewhat lower than Tesla’s outlook for 2024/2025)."
GM, aka generally Good Motors, after its latest earnings report
On Oct. 22, General Motors (GM) reported impressive third-quarter 2024 results that were built off the sales performance of its bread-and-butter gas-powered trucks and SUVs.
Net income for Q3 came in at $3.3 billion, allowing the automaker to project adjusted full year earnings between $14 billion and $15 billion, up from its prior estimate that was between $13 billion and $15 billion.
In a letter to investors, GM CEO Mary Barra attributed this growth to improved EV profitability, rising EV sales and market share.
"In the third quarter, we grew U.S. retail market share with above-average pricing, well-managed inventories and below-average incentives. In China, sales improved from the second quarter, and dealer inventory fell sharply. In addition, we remain on track to reach our 2024 EV production and profitability targets," Barra said.
"This is a function of our investments in a dedicated EV platform, U.S. battery cell manufacturing and flexible assembly capacity. Most of our competitors lack these advantages. And no one can match the depth and breadth of our strategic EV portfolio."
However, GM still lost $137 million in China, as its partnership with SAIC produced 50% fewer vehicles than last year. Additionally, it lost $383 million on its Waymo competitor, the Cruise robotaxi service.
Related: These parents shun Uber for Waymo for a built-in safety feature
Nonetheless, the positive news was music to the ears of analysts from different firms on the street.
In a note published on Oct. 23, Wedbush analyst Dan Ives compared the automaker to Yankees outfielder Juan Soto, declaring that GM "delivered a Juan Soto-like quarter with third-quarter results coming in very strong" in consecutive quarters due to its growth in both its ICE and EV sectors.
Ives declared that GM's "Mojo is back," keeping its "outperform" rating and raising its price target from $55 to $60.
"Overall, we believe this momentum seen over the past few quarters has been a long awaited turnaround for the GM story and is now underway with stable pricing across its portfolio while focusing on margins/capital efficiency."
Additionally, analysts at J.P. Morgan, Deutsche Bank, and Barclays raised their price targets from $64 to $70, $53 to $56, and $64 to $70, respectively, based on a new stock buyback scheme it will be implementing.
In a statement on Oct. 22, GM Chief Financial Officer Paul Jacobson said the company expects to buy back about 120 million shares by early 2025.
Related: Veteran fund manager sees world of pain coming for stocks
