Take a pass on Tesla stock, Roth Capital says

Electric auto company Tesla (Tesla Stock Quote, Charts, News, Analysts, Financials NASDAQ:TSLA) may have just delivered a bang-up quarter in some people’s eyes, but Roth Capital Partners analyst Craig Irwin isn’t buying, as shares are still trading at an oversized premium to other car companies. Irwin provided an update to clients on Thursday where he maintained a “Neutral” rating on TSLA as well as a 12-month target price of $85.00, which at press time represented a projected return of negative 41 per cent.

Tesla reported its fourth quarter 2022 financials on Thursday, showing revenue of $24.318 billion, good for a year-over-year increase of 37 per cent and adjusted EPS of $1.19 per share compared to $0.85 a year earlier. The consensus call was for $21.9 billion in revenue and $0.99 per share in adjusted earnings, while the Roth Capital forecasts were for $22.3 billion in revenue and $1.07 per share in earnings. (All figures in US dollars.)

For the 2022 year, Tesla grew its revenue by 51 per cent and net income more than doubled to $12.6 billion.

“As we progress into 2023, we know that there are questions about the near-term impact of an uncertain macroeconomic environment, and in particular with rising interest rates. The Tesla team is used to challenges, given the culture required to get the company to where it is today,” the company wrote in an update.

“In the near term we are accelerating our cost reduction roadmap and driving towards higher production rates, while staying focused on executing against the next phase of our roadmap,” Tesla said.

Looking at the results, Irwin said it appears that Tesla’s price cuts (of 13 to 14 per cent recently and coming after a roughly ten per cent increase in 2022) to its vehicles is stimulating demand, as management said the daily order cadence is now outpacing production by about a two to one margin.

As for vehicle deliveries, Irwin noted guidance indicating about 1.8 million vehicles delivered in 2023.

At the same time, Irwin said he’s maintaining his position on TSLA, saying a Neutral rating “appropriately balances how Tesla is positioned to continue executing, but the shares are valued at an oversize premium to all peers in the automotive sector, in our view.”

“The current market valuation appears to rest on the specious assumption that the hundreds of EVs slated for launch by ’25 will all be flops. Tesla does not operate in a vacuum,” Irwin said.