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The Ratings Game: ‘Electric profits.’ Analysts cheer what’s under the hood of Tesla results despite supply headaches

Not even supply-chain worries can get a Tesla bull down, with analysts on Wall Street peeking under the hood of the electric car maker’s latest results and still liking most of what they see.

Describing Tesla’s
TSLA,
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record quarterly profit and sales as “electric,” Baird analysts Ben Kallo and George Gianarikas lifted their price target to $888 a share.

“Tesla reported exceptional profitability as it continues to flex its operational chops by outperforming its industry peers in delivering strong volumes in an environment marred by supply-chain issues while improving profits to an all-time record,” said the pair in a note.

The auto maker reported records on both third quarter profit — $1.6 billion, or $1.44 a share — and sales — up 57% to $13.8 billion — but spooked some investors by removing language in its outlook that had kept it optimistic about 2021’s growth. In a refrain heard across many industries right now, Tesla complained of clogged ports and other supply-chain problems preventing its factories from running at maximum capacity.

Read: Tesla hits record quarterly profit, says supply-chain snags kept its factories from running ‘full speed’

Wedbush’s Dan Ives, who has a 12-month price target of $1,000 and an outperform rating on Tesla, said current supply-chain issues likely took roughly 40,000 cars off its annual numbers, but the company should still be able to produce around 900,000 for 2021 “with a 1.3 million/1.4 million bogey for 2022.”

The Tesla bull highlighted the company’s adjusted EBITDA, or earnings before interest, taxes, depreciation, and amortization of $3.2 billion that beat the Street’s $2.79 billion estimate. It speaks to a “more profitable Tesla going forward which is key to a higher rerating on the stock,” he said.

Ives said the opening of factories in Berlin and Austin should help bring more supply online, and expressed optimism over China, which he said likely saw 150,000 deliveries in September alone, “a clear indicator of this green tidal wave taking hold for Musk & Co. across the board.”

Opinion: Tesla’s earnings show is more cautious — and yes, boring — without Elon around

“After delivering another impressive quarter of cost leverage and posting EBIT margin above longer term ‘low-teen’ guidance, Tesla is reaching a juncture where it can better control balancing pricing, margin and affordability, especially if approaching a tipping point where software becomes a bigger contributor to the business model,” said a team of Jefferies analysts led by Philippe Houchois, who rate Tesla a buy with a price target of $950 per share.

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