The Ratings Game: Tesla’s sales a ‘sigh of relief’ for bulls

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Tesla Inc. may have cleared a hurdle this week, but investors remained cautions about the company’s prospects amid the continued fallout from the novel coronavirus pandemic.

Tesla late Thursday reported first-quarter deliveries just a bit lower than consensus, which sent shares to double-digit gains in the extended session.

Tesla TSLA, +4.44%  shares traded as high as $515.49 Friday, poised to snap a two-day losing streak, a day after the Silicon Valley electric-car maker announced first-quarter deliveries, its proxy for sales, and production numbers.

The stock is up 77% so far this year, contrasting with losses around 14% for the S&P 500 index. SPX, -2.43% Shares are down 47% from their all-time closing high of $917.42 on Feb. 19. It was the best performing stock in the Nasdaq 100 on Friday.

It was a “small victory in a dark environment,” analyst Dan Ives of Wedbush said in a note.

Investors feared how bad first quarter sales would be given the economic destruction brought about by the novel coronavirus and demand seeing “a screeching halt” worldwide, he said.

“It appears (Tesla’s) China production and demand are starting to rebound and should be a key growth driver over the coming quarters, although clear challenges remain in the months ahead as Tesla (and every other company) navigates this treacherous consumer landscape,” Ives said.

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Cash burn will be closely watched in the near term but long-term trends for Tesla remain “very healthy,” he said. Investors’ attention will shift to the company’s earnings report in the next few weeks.

Garrett Nelson at CFRA raised his price target on Tesla by $40 to $480, and lowered per-share earnings estimates for the year on COVID-19-related shutdowns. The first-quarter production and delivery numbers went some way in assuaging investors more immediate, shutdown-related concerns.

“In light of the stock’s YTD outperformance and with the Fremont factory having been idle since March 23 (and the number of Covid-19 cases in the Bay area continuing to escalate), we remain cautious on the shares and the company’s near-term earnings outlook, Nelson said.

Analysts at Canaccord Genuity took a more bullish tack and said they were “highly encouraged” by the sales and production numbers.

Related: GM’s Q1 deliveries drop 7%, stock falls

“lt’s as a clear indication that EV demand had remained strong for Tesla well into the quarter, and that the company is well positioned to satisfy that renewed demand once the COVID-19 pandemic abates,” they said.

Several on Wall Street also lauded Tesla’s production of nearly 103,000 vehicles for the quarter given factory shutdowns in China and California. Tesla produced 77,000 vehicles in the same quarter last year.

“Impressive” production numbers notwithstanding, it is “very difficult to predict how Tesla will fare during Q2 (due to COVID-19), and we prefer to err on the side of caution,” Alex Potter with Piper Sandler said in a note.

He kept his delivery expectation at around 438,000 vehicles, compared with company’s expectations of more than 500,000. Tesla has not updated its 2020 delivery guidance.

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