RBC Capital builds on confidence as Tesla shows they can spur demand growth

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By Michael Elkins

RBC Capital reiterated an Outperform rating on Tesla (NASDAQ:TSLA) and raised their price target on the stock to $223.00 (From $186.00) following the electric vehicle company’s 4Q earnings results.

Analysts wrote in a note, “TSLA is demonstrating they can spur demand growth while maintaining margins above 20%, a positive for the near- and long-term outlook. Competition is responding (Mach E), but we do wonder about the longer-term sustainability of competitor price cuts given more challenging profit margins.”

Tesla saw a strong demand response from their recent price cuts through late January and is seeing the strongest orders year-to-date than ever in their history. TSLA also benefits from recent updated clean vehicle classification rules that redefine the Model Y price cap to $80k ($55k prior). The electric vehicle giant has already raised the price of the Model Y once (+$500) in response to strong demand and this reclassification could provide additional optionality to adjust pricing further.

Guidance is for 1.8 million deliveries this year (+37% y/y) but sees upside potential to do 2M cars this year under the right conditions. RBC Capital models 1.81M. Management is confident excluding leases and reg credits they will be able to maintain average ASPs above $47k this year. RBC models ~$48.5k.

TSLA continues to de-risk the order delivery schedule as the company moves away from late-quarter deliveries. In 4Q22, third-month deliveries accounted for only 51% of total units, down from 64% in 3Q22 and 74% in 2Q22.

Shares of TSLA are up 1.15% in morning trading on Monday.