Tesla, Inc. (NASDAQ:TSLA) stock has been on a tremendous trip this year. I extended my investment around the time I called for a bottom in Tesla’s shares at the $110-100 buy-in level. Nonetheless, despite the EV giant’s shares surging 180% in the last six months, Tesla stock remains a cornerstone position in my portfolio. Tesla recently announced record deliveries, and Q2 revenue estimates appear low. Moreover, Tesla could publish better-than-expected revenue and EPS results for the full year.
Also, Tesla’s Semi and Cybertruck sales could contribute considerably to its income in the years ahead. Furthermore, Tesla should continue commanding a relatively high P/E multiple due to its remarkable growth prospects and considerable profitability potential. As a result, as the company expands in the next few years, Tesla stock price should skyrocket.
Record Deliveries Should Allow for Revenue Beats
Tesla produced 479,700 vehicles in the most recent quarter (Q2 2023), delivering 466,140 vehicles. Tesla sold over 19K Model S/X vehicles and over 447K Model 3/Y vehicles. Moreover, Tesla’s deliveries surpassed consensus forecast estimates, increasing by an astounding 83% YoY.
2023 should be a major year for Tesla, as the company might deliver more than 2 million cars this year. In the first half of the year, the company delivered approximately 889,000 vehicles, and H2 sales should be even higher. Therefore, Tesla might sell roughly 2.1 million S/3/X/Y vehicles this year.
2023 Q2 – Earnings Preview
Tesla will report earnings early next week, and the company’s revenue should be higher than expected. The consensus estimate is for $24.68B in revenue for Q2, but Tesla likely performed better. Last quarter, Tesla delivered a record number of vehicles, including 19,225 Model S/X cars and 446,915 Model 3/Y vehicles.
Using an ASP of around $120,000 for a Model S/X vehicle (minus 8% for lease accounting for 17,687 units), the Model S/X segment generated over $2.2 billion in sales last quarter.
After adjusting for lease accounting in the Model 3/Y sector by 5%, we arrive at 424,569 vehicles sold in Q2. If we apply a $47,000 ASP to this sector, we get around $20.4 billion in sales for the Model 3/Y market.
As a result, Tesla’s Q2 revenue could be as follows:
Model S/X: $2.1 billion
Model 3/Y costs $19.9B.
$600 million in regulatory credits
Lease: $600 million
EG&S: $1.5B
Services/other: $2B
Estimated revenue for the second quarter: $26.7 billion.
Please keep in mind that all estimates are based on publicly available information such as Tesla’s 10-Q.
Revenue Estimates for the Second Quarter Are Likely Too Low
The consensus revenue estimate for Q2 is only $24.68 billion. Therefore, Tesla has a strong possibility of outperforming. Furthermore, if the company meets my revenue projection, it will be an 8% increase over the consensus figure, and its stock might rise significantly following Q2 reporting. Furthermore, higher-than-expected results could lead to more upward revenue growth and earnings revisions from the analyst community. EPS-wise, the consensus forecast is around $0.82, but Tesla’s EPS might be higher in the 90-cent to $1 area.
Tesla Semi Should Help Revenue Growth
Tesla plans to produce at least 50,000 Semi Trucks annually. Based on an estimated ASP of around $250,000, the Semi should generate approximately $12.5B in annual revenue in its first few years of production. Tesla has delivered the first Semi Trucks to PepsiCo (NYSE:PEP), with other corporations such as Walmart (NYSE:WMT), United Parcel Service, Inc. (NYSE:UPS), and others on the way.
In America, between 95,000 and 284,000 new semi trucks are sold each year (closer to the upper end in recent years). A truck with a sleeper can cost around $150,000 on average, and a fully loaded semi can cost more than $200,000. Provided the enormous savings firms may make owing to fuel savings, maintenance, and other factors, it is no wonder more and more organizations are choosing the Tesla Semi. While Semi production may initially be in the 10-20K annual range, Tesla may be able to scale up to 50K relatively quickly, achieving the target production within the first few years of its launch.
Cybertruck Production to Begin Soon
The Tesla Cybertruck is expected to go into production in September of this year and could provide a significant new cash source for the manufacturer. Tesla intends to construct the 100% electric pickup truck in limited quantities this year before ramping up production for next year as the firm grows. Elon Musk, CEO of Tesla, was spotted driving a production-ready Cybertruck around Austin just months before production of the vehicle is set to begin.
So, How Much Money Will the Cybertruck Bring in for Tesla?
Initially, when the prices for the Cybertruck were revealed in 2019, the starting prices for the numerous truck types ranged from roughly $40,000-70,000. However, this was four years ago, and owing to inflation and other considerations, the Cybertruck price range might be approximately $55,000-$85,000. Furthermore, the Cybertruck’s average selling price may be around $70,000-75,000.
For instance, the ASP for a Ford Motor Company (NYSE:F) F150 appears to be in the $50-60K area, which is much cheaper than the ASP for Tesla’s Cybertruck. As a result, in the early stages of the Cybertruck, demand may be quite modest. However, demand in the United States is expected to rise in the coming years. Another issue to consider is that the Cybertruck may become primarily a US vehicle in the coming years.
Nonetheless, the pickup truck market in the United States is expected to exceed $74 billion this year and could reach $80 billion by 2027. As a result, if Tesla’s Cybertruck achieves a 10% market share (in dollars), it could generate $7-8 billion in annual revenue in the coming years. The $7-8B figure is also consistent with around 100,000 Cybertruck units, which Tesla is likely to produce/deliver in the near term.
Revenue Estimates for the Full Year 2023
Tesla delivered roughly 30K Model S/X vehicles in the first half, and the full-year deliveries could come at around 80K. If around 8% of Model S/X deliveries are subject to lease accounting, Tesla might sell approximately 75,000 luxury Model S/X vehicles this year. Using an average selling price “ASP” of around $125,000, we may expect sales of around $9.4B in the Model S/X space this year.
Incredibly, Tesla might supply close to two million Model 3/Y automobiles in 2023. I want to highlight how enormously popular the Model 3/Y cars are now, as Toyota’s (NYSE:TM) Camry sold fewer than 300,000 units last year. Also, if we adjust 5% for lease accounting, we will reach around 1.9 million in unit sales this year. Using an ASP of roughly $48,000, revenues in 2023 are expected to be around $91.2 billion this year.
Model S/X: $9.4 billion
Model 3/Y costs $91.2B.
Regulatory credits:$2.4B
Lease: $2.5 billion
EG&S: $5.5B
$8 billion in services and other expenditures
2023 Total Revenues:$116.5B
We could see around $116.5B in total revenues from Tesla this year. My prediction is around 15% higher than the consensus, which is only for about $101 billion in sales this year. Also for this year, we may estimate Tesla’s gross margins, operational costs, and overall profitability.
Estimated Gross Margin/Gross Profit
Model S/X: 17% = $1.6 billion
Regulatory credits: N/A = $2.4B Model 3/Y: 22% = $20.1B
40% leasing = $1 billion
EG&S: 15% = $0.8B
Services/other: 10% = $0.8 billion
Gross Margin: 23%
2023 Gross Profit: $26.7B. Operating Costs/Margin/Profit Estimates
R&D costs: $3.3 billion
SG&A costs: $4.8 billion
Total operational costs: $8.1 billion
16% operating margin
Operating Profit: $18.6B Estimated Net Income/EPS in 2023
Net income: $14.8 billion; earnings per share: $4.25.
Revenue expectations are likely to be too low from a valuation standpoint.
Despite solid growth estimates, many analysts may be behind the Tesla curve. The corporation has frequently been surprised by the positive, and its most recent delivery figures were better than predicted. The business expected 440-450K vehicle deliveries in the second quarter, but instead delivered roughly 466K vehicles, exceeding its expectations. In addition, we should consider upcoming products such as the Cybertruck and the Tesla Semi, which will generate tens of billions of dollars in extra income in the coming years.
Objectively, the Tesla Semi and Cybertruck might generate an additional $20 billion in revenue over the next 2-3 years. Moreover, growth in Tesla’s Model S/3/X/Y segments should continue in the coming years, and we may see a return from price cuts as the economy resumes growth. Furthermore, future AI, self-driving, robots, driverless taxi chances, and other revenue opportunities must be considered. As a result, Tesla’s revenues may be higher than expected this year and in the coming years.
The current consensus sales estimate for this year is $101 billion. However, my estimate is around $116.5 billion, which is about 15% higher than the consensus figure. Moreover, with new products and services coming up soon, Tesla’s revenues and profitability could expand faster than projected in future years.
During the decline, consensus projections for this year have decreased significantly. The consensus EPS projection for 2023 is only $3.55, implying a 13% reduction year on year. This ultra-low estimate also implies that Tesla is trading at around 76 times this year’s earnings per share. However, my 2023 EPS projection is $4.25 on $116.5B in revenue. As a result, Tesla may be trading at over 64 times this year’s expectations and produce significantly higher revenue growth than the analyst community anticipates.
Furthermore, the EPS estimate range for next year is wide ($3.70-8.30), indicating that the analyst community is split on the company’s profitability prospects in the coming years. Tesla’s profitability could increase faster than expected, with the company earning around $8 per share next year. This dynamic means Tesla might be selling around 34 times forward earnings, suggesting the company’s value may be considerably more attractive than it appears at first glance.
Tesla Stock Should Continue to Rise in the Long Run
If Tesla maintains a healthy revenue growth rate of 25-30% in the coming years, it will be able to boost sales quickly and profitably. EPS could rise significantly as the economy recovers and Tesla becomes more profitable. Due to Tesla’s large sales growth rate and considerable profitability possibilities, its stock should continue trading at a relatively high P/E multiple of roughly 25-35 in the coming years. As a result, we may see Tesla’s stock price rise significantly in the coming years, making Tesla one of the top buy-and-hold candidates for the next decade or more.
Tesla Faces Risks
Despite my optimistic view of Tesla, there are a number of risks to consider before committing capital to this investment. Demand slowing, increased competition, supply issues, decreased growth, potential issues with regulators, foreign governments, and other variables are all valid risks. Rising concerns may worsen sentiment, causing multiple compression and possibly causing Tesla stock price to fall.
Featured Image: Unsplash @ David von Diemar
