Wedbush Reviews Tesla (TSLA) as it Prepares for 2Q Report

As Tesla (NASDAQ: TSLA) prepares to report its 2Q earnings on 7/26, the Street is focused on issues that have burdened the stock so far this year. Wedbush analyst, Daniel Ives says that this year shares have underperformed as the trifecta of: 1) increasing EV competition, 2) China PR/safety issues negatively impacting demand, and 3) the chip shortage overhang. Wedbush gives TSLA an Outperform rating and a $1,000 price target.

Despite the obstacles Tesla has faced in 2021, the company still hit 200k+ deliveries in the June quarter and appears to be on a trajectory to possibly hit 900k for the year. Ives also believes that there are signs that Tesla will have a stronger 2nd half of 2021.

A month ago, the Chinese Administration for Market Regulation ordered Tesla to address safety concerns in more than 285,000 vehicles. The Chinese agency said the vehicles’ autopilot systems could be activated automatically, potentially leading to crashes from sudden acceleration. The company apologized and was able to come up with a software solution and offered to upgrade the vehicles for free. Since then, Chinese sales have continued to climb back towards record highs.

Chip and part shortages have plagued not just the EV market, but the entire auto market. However, some experts believe that Tesla has weathered the chips and parts shortages well, getting praise for how it has handled the shortages so far. Despite the shortages, Tesla claims to have sold 201,250 cars globally in the second quarter, more than twice as many as in the same period a year earlier, suggesting that it was not as badly affected by the chip shortage.

With EVs representing 3% of overall autos globally and poised to hit 10% by 2025 there will be much more competition in a massively increasing share of the global auto market. Wedbush believes “the EV market opportunity and green tidal wave will translate into a $5 trillion market over the next decade with Tesla a disproportional beneficiary of this broader consumer adoption towards EVs and autonomous over the coming years.” Ives views next week’s earnings report and commentary as a positive catalyst for the stock.

The analyst maintained an Outperform rating and $1,000 price target into the results

By Michael Elkins | [email protected]

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