Tesla Stocks rise as Wedbush’s Ives raises target to $500

Shares of automaker, Tesla rose 1.7% during Monday premarket trading following Wedbush analyst Dan Ives’ price increase.

The analyst rose Tesla’s target to $500 ahead of the company’s third-quarter earnings report which will be out this week. Ives said he believes in Tesla’s capability of growing beyond its current state, he, therefore, boosted Tesla’s target to $500 from $475.

“We believe Tesla’s improved manufacturing efficiency and shining Giga 3 success in China will be on full display later this week and lead to another strong bottom-line performance which should beat the Street in our opinion,” Ives wrote in a letter to clients. “In terms of overall unit demand heading into year-end we believe Tesla is on pace to impressively achieve in the area code of 500k units for the year, in a line in the sand that was a pipe dream six months ago as Tesla (and other auto players) have navigated this unprecedented COVID backdrop.”

Tesla’s stock which dropped 4.8% in the last two days, has risen 46.5% in the last three months, with the S&P 500 gaining 8.0%.

According to Tesla, the company is set to report its third-quarter earnings after Wednesday’s closing bell. In a consensus compiled by FactSet, Tesla’s earnings will be 55 cents per share and revenue of $8.38 billion.

What investors should expect in Tesla’s earnings report

The EV maker is scheduled to release its FY 2020 third-quarter results on Wednesday, October 21 after the market’s closing bell. Analysts, on average, expect Tesla to report non-GAAP earnings of 56 cents a share, higher than a year ago of 37 cents a share. Analysts also expect revenue at $8.26 billion, up 31% from $6.3 billion reported in the same quarter a year ago.

Credit Suisse analyst Dan Levy in a recent note said Tesla is likely to report higher than the consensus third-quarter results. He estimates non-GAAP earnings of 73 cents per share.

Goldman Sachs analyst Mark Delaney expects earnings of 60 cents per share. He said auto OEMs including Tesla are beneficiaries of increased auto demand.

The third quarter is an important quarter for Tesla as its performance will show investors whether or not the company can maintain profitability regardless of the lower regulatory credit revenue, according to Levy. He added that Tesla’s gross margin is at the center of the much expected EPS beat as greater volumes boost the margin. The quarter’s gross margins are expected to be at 20.9%, up two points sequentially.

Tesla’s annual production target for 2020 is 500,000 vehicles, but it may be hard for the company to achieve. Levy isn’t expecting the EV maker to take down its target on the earnings call, however, he forecasts full-year production of 486,000.