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Tesla stocks rockets higher as quarterly sales crush expectations

Tesla Inc.’s massive stock rally continued Thursday after the Silicon Valley automaker easily exceeded second-quarter sales expectations.

+ 6.48%

said it delivered about 90,650 vehicles in the second quarter, before the 72,000 deliveries that analysts investigated by FactSet had predicted. Tesla’s actual delivery bill, its proxy for sales, also conveniently surpassed even the highest estimate tracked by FactSet, which was 86,000.

The stock rose nearly 9% and traded as high as $ 1

,228, which puts it on track for another final record.

Tesla delivered 80,050 Model 3 and Model Y vehicles combined during the period, as well as 10,600 Model S and Model X vehicles in total.

The company announced that it manufactured 82,000 vehicles during the June quarter, though production at its main plant in Fremont, California, was closed for much of the quarter. Tesla’s factory, which now produces cars back at pre-pandemic levels, says the company.

Read: Some workers complain that Tesla threatened to fire if they do not return to work

“In our opinion, a delivery number of 90,000 in this COVID lock environment is a jaw dropper and the bulls will run with this as a potential paradigm changer coming forward,” Wedbush analyst Daniel Ives wrote after the delivery numbers came out and called the numbers a ” Bigger home driving. ” His research indicates that China “seemed to be the star of the show” during the second quarter, although Tesla did not provide any regional breakdowns in the emissions.

Before Tesla’s delivery report, Ives raised its price target for the stock to $ 1,250 from $ 1,000, although it maintained a neutral rating. He also said his bull target is now $ 2,000.

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CFRA analyst Garrett Nelson raised his price target on Tesla shares by $ 400 to $ 1,100, which meant a 10% downside. Tesla was probably sitting on a high stock at the end of March, which contributed to stronger sales than expected, he said in a note.

Garrett retained its rating on the stock. The market gives Tesla “plenty of credit for future cash flow development and (we) are unwilling to recommend the purchase of the shares at these levels,” he said.

Joseph Spak of RBC Capital also struck a more cautious note when he saw “signs of trouble” for Tesla’s older vehicle models and in markets where Teslas is no longer a novelty.

“Yes, (Tesla) was able to show good headline numbers compared to a car industry that really felt the influence of COVID-19,” he said. But Tesla benefited from entering China, where it had previously sold cars but started making cars only this year.

“Of course, this is counted as growth, and new markets / products are part of the Tesla story,” but assuming about 30,000 Model 3 manufacturers in China, that means sales of Model 3 and Model Y in the rest of the world, primarily mature markets such as North America and Europe fell by approximately 36% compared to the year.

“And remember there were North America / Europe price reductions on (Model 3) this quarter, a move we generally see as one to stimulate demand. So once again we see some evidence that a Tesla product matures quickly after entering a market and measured demand is satisfied, ”Spak wrote in the note.

“Credit where credit depends on Tesla – but perhaps the most amazing thing about (Tesla) stock is the story,” he said.

Tesla’s quarterly deliveries “are further evidence that Tesla has the car industry backing into a corner,” said Gene Munster of Loup Ventures, a former Wall Street risk capitalist analyst. “It’s becoming more and more difficult to imagine a scenario where older car manufacturers will find a way to meaningfully expand the small proportion of EVs they have today.”

General Motors Co.
+ 1.81%

on Wednesday, sales in the second quarter were down 34%, while Toyota Motor Corp.
+ 1.87%

sales fell by about a third and Fiat Chrysler Automobiles NV
+ 2.27%

reported a decline of 39%. Car manufacturers offered discounts and financing agreements to enticing buyers, but these were not enough to offset factory and dealer agreements due to the pandemic.

“Tesla wins because they have a product that is measurably better than both gas and electric competitors,” Munster said.

Concerns that Tesla would eventually run out of cash and not be able to make cars at scale have “diminished meaningfully.”

When Tesla reports results for the second quarter, there is also concern that the company is structurally unprofitable to disappear. Based on Thursday’s sales number, the company is likely to report better than expected in a month or so, he said.

One question remains, Munster said: Equity valuation. “If Tesla can continue to capture 70-80% of the US EV market, we expect the shares to remain truly valued and continue higher given the large market potential,” he said.

Tesla shares have risen almost 150% in the last three months and have gained 400% in the last 12 months. S&P 500
+ 0.70%

has increased by 23% over a three-month period and 4.8% over the past year.

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