Tesla has pleasantly shocked investors after a fairly long period of underperformance, and the ensuing elation is clearly visible in the market today as the EV giant's shares notch a gain of 16 percent, which corresponds to one of their best performances ever. Now, Wall Street is out with a few critical insights into Tesla's stellar earnings report.
BofA raises TSLA price target from $255 to $265
Goldman raises TSLA price target from $230 to $250 pic.twitter.com/JHE8L0avFG— zerohedge (@zerohedge) October 24, 2024
As we reported on Wednesday, Tesla's auto gross margin (ex-Regulatory Credits) printed at 17.05 percent for the just-concluded quarter against expectations of 14.90 percent. According to the Bank of America (BofA), this upside was primarily driven by "volume leverage, lower raws, freight, duties, and FSD."
Basically, Tesla was able to leverage its apex position within the EV industry to negotiate better terms with raw material suppliers. On a granular level, the EV giant's margin received a sizable boost from its lithium procurement efforts, where it was able to drive a particularly hard bargain. However, Oppenheimer believes that this tailwind will offer "diminishing returns once lithium prices stabilize."
Of course, Tesla's FSD-related deferred revenue recognition offered the single largest boost to its auto gross margin (ex-RC) metric. In light of the new FSD capabilities that Tesla rolled out recently, including the smart summon and auto-park features, the EV giant recognized $326 million of its FSD-related deferred revenue in the just-concluded quarter. As per Goldman Sachs' calculations, Tesla's auto gross margin (ex-RC) metric would have printed at 15.6 percent without this quantum of recognition.
Do note that Tesla's ASP per vehicle metric negatively contributed to its margins during Q3, given the company's ongoing financing discounts to maintain sales momentum.
Interestingly, the EV giant now expects its total deliveries for 2024 to record a slight gain with respect to the 2023's total. Tesla delivered 386,810 units in Q1 2024, 443,956 units in Q2, and 462,890 units in Q3. Therefore, to match its total deliveries of 1.81 million units in 2023, Tesla will have to deliver a whopping 516,344 units in Q4 2024.
Now we come to the really interesting part. Goldman Sachs appears baffled with the disconnect that prevails between the crowd-sourced FSD performance data, which currently shows around 100 miles per critical intervention, and Tesla's tall claims of reaching "10K+ miles per critical intervention this year or next."
Bear in mind that Elon Musk had announced during the Cybercab reveal event on the 10th of October that the "completely autonomous" unsupervised FSD for Models S, 3, X, and Y will start rolling out next year in Texas and California. Moreover, Elon Musk said during yesterday's earnings call that the Cybercab will reach volume production of 2 million units per year in 2026.
About the author: Writing is my one incontrovertible passion. Over the past six years, he has authored over 2,200 distinct articles on financial and tech-related topics, spanning nearly 1 million words. And he has been a member of Wcctech mobile team since 2025. As an alumnus of the University of Toronto, Rotman Commerce Program, I bring nuance, in-depth knowledge, and a unique perspective to every topic that I cover. When I'm not writing, I'm traveling the world, exploring hidden confectionaries and restaurants as an aspiring food connoisseur.
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