Analyst Upgrades Tesla's Stock On "Strong Competitive Advantage"

Tesla's stock has always been volatile, but this analyst is forecasting an upside thanks to the early focus on vertical integration.

Tesla Model 3 and Model Y

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By: EVANNEX

Jun 27, 2022 at 9:17am ET

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Posted on EVANNEX on June 25, 2022, by Zachary Visconti

Despite the current economic turndown, and a “tough quarter” for Tesla according to Elon Musk, one analyst upgraded the company’s stock recently, citing “favorable” positioning. The analyst posits that Tesla is set up well for both the short- and long-term markets, largely due to its early focus on vertical integration.

Above: Tesla's logo on a white background. Photo: Manny Becerra / Unsplash

RBC Capital’s Joseph Spak upgraded Tesla’s stock to outperform, saying that the electric automaker has a “more favorable near-term setup,” according to MarketWatch. Spak also noted that Tesla’s vertically integrated model will give it a competitive advantage in the mid- and near-term.

For the second quarter, most analysts expect Tesla to deliver around 279,000 units, says Spak, with industry buy-side estimates as low as 250,000 units. Spak is forecasting Tesla to deliver 249,000 units, with room for an upside to the estimate if Tesla’s Gigafactory Shanghai are fully operational again as detailed in some reports.

In addition to deliveries, Spak says Tesla could expect to see a margin upside in the second quarter and in the back half of the year, despite expectations for delivery decreases from the first to the second quarter. With price increases, Tesla could see up to a 3 percent boost in average selling prices, “given the pricing actions Tesla has taken a while back but not been able to realize as they have been working through their backlog.”

To be fair, most automakers have raised their prices. And while the move may not benefit buyers, it may help Tesla make it through the current economic period as inflation ravages raw materials.

Above: Tesla raises prices to address supply chain challenges. YouTube: Reuters

Demand for Tesla’s vehicles is still high, though. At the time of writing, US Tesla orders of the Model 3 RWD and AWD Long Range variants have an estimated delivery of September to December, while the Model Y Long Range variant has an estimated delivery of January to April of 2023. Both the Model 3 and Y Performance models come much sooner, with delivery estimates of June through August and August through October, respectively.

Tesla’s supply chain deals may have helped mitigate the effects of inflation hitting raw materials, with Spak emphasizing this as the part of the key to its advantageous industry positioning.

“While TSLA is fairly secretive about the deals they have cut for supply of raw materials, in talking to contacts we believe they have done more than other OEMs,” said Spak. “The company’s early focus on vertical integration (not just batteries/raw materials but also motors, semis, software) is likely to pay off.”