On Friday, Phillip Securities adjusted its stance on Tesla Inc (NASDAQ:TSLA) stock, upgrading the electric vehicle manufacturer's stock from Sell to Reduce. The firm set a new price target of $230, marking a significant increase from the previous target of $135.
The upgrade follows Tesla's third-quarter performance, which aligned with expectations. The company posted an improvement in adjusted profit after tax and minority interests (PATMI), excluding stock-based compensation, attributed to higher factory utilization and ongoing cost-reduction efforts. Tesla's nine-month performance reached 69% and 74% of Phillip Securities' full-year 2024 estimates for revenue and adjusted PATMI, respectively.
Tesla reported 463,000 vehicle deliveries for the third quarter, a 6% year-over-year increase, contrasting with a 7% decline in the first half of the year. The company also experienced its second consecutive quarter of gross margin expansion, reaching 20%, which represents Tesla's most substantial gross margin increase since the first quarter of 2022.
Despite a continuous decline in average selling prices for the seventh consecutive quarter, Phillip Securities has maintained its full-year 2024 revenue estimates for Tesla. However, the firm has increased its PATMI forecast by 14% to reflect the positive impact of cost-reduction initiatives and higher utilization rates.
Additionally, Phillip Securities has revised its terminal growth rate assumptions for Tesla from 4% to 5%. This adjustment reflects the stronger contributions expected from Tesla's energy and services businesses. The revised discount cash flow (DCF) target price to $230 is a reflection of these updated growth rate assumptions and the firm's recognition of Tesla's margin upside. Despite the upgrade, Phillip Securities remains cautious on Tesla, citing the need for clarity on near-term volume and margin challenges.
InvestingPro Insights
To complement Phillip Securities' analysis, recent data from InvestingPro offers additional insights into Tesla's financial position. The company's market capitalization stands at an impressive $836.16 billion, reflecting its dominant position in the electric vehicle market. Tesla's P/E ratio of 58.57 indicates that investors are willing to pay a premium for its growth potential, aligning with the firm's upgraded outlook.
InvestingPro Tips highlight Tesla's financial strength, noting that the company "holds more cash than debt on its balance sheet" and that "liquid assets exceed short term obligations." These factors support Tesla's ability to invest in growth initiatives and weather potential market volatility, which may have contributed to Phillip Securities' more optimistic stance.
Moreover, Tesla's recent stock performance has been robust, with InvestingPro data showing a significant 18.02% return over the last week and a 53.06% return over the past six months. This aligns with the upgraded price target and reflects growing investor confidence in Tesla's business model and future prospects.
For investors seeking a more comprehensive analysis, InvestingPro offers 21 additional tips on Tesla, providing a deeper understanding of the company's financial health and market position.
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