Tesla
(TSLA)
is
the
first
of
the
Magnificent
Seven
stocks
to
report
quarterly
earnings.
Here’s
what
our
analyst
thought
of
the
company’s
update,
which
showed
a
fall
in
profits
but
some
more
news
on
affordable
models,
which
are
due
next
year.
• Fair
Value
Estimate:
$200
•
Morningstar
Rating:
4
stars
•
Morningstar
Economic
Moat
Rating:
Narrow
•
Morningstar
Uncertainty
Rating:
Very
High
What
We
Thought
Of
Tesla
Earnings
We’ve
raised
our
fair
value
estimate
for
narrow-moat
Tesla to
$200
per
share
from
$195
following
first-quarter
earnings,
due
to
an
improved
near-term
outlook.
Shares
were
up
over
10%
in
after-hours
trading
as
the
market
reacted
positively
to
management’s
outlook.
At
current
prices,
we
view
Tesla
as
undervalued,
with
the
stock
trading
in
4-star
territory.
We
had
four
key
takeaways.
First,
the
affordable
vehicle
is
still
on
track
for
first
deliveries
by
the
end
of
2025.
Tesla’s
affordable
vehicles
are
a
catalyst
for
shares.
Affordable
vehicles
should
eventually
generate
a
majority
of
its
total
deliveries.
We
continue
to
forecast
that
Tesla
delivers
around
5
million
vehicles
by
2030.
Second,
the
full
self-driving
subscription
software,
or
FSD,
is
seeing
stronger
adoption.
We
estimate
over
10%
of
the
eligible
fleet
has
adopted
subscription
software,
which
is
above
our
prior
forecast.
As
such,
we’ve
updated
our
assumptions
for
a
higher
adoption
rate.
In
our
view,
FSD
will
be
a
driver
of
consumers
choosing
Tesla
over
other
brands,
which
supports
our
outlook
for
deliveries
growth
over
the
rest
of
the
decade.
Third,
we
raised
our
energy
storage
volume
growth
forecast.
Energy
storage
volumes
increased
at
just
4%
year
over
year
in
the
first
quarter.
However,
as
much
of
the
business
is
of
large-scale
batteries
built
on
longer-term
projects,
volumes
can
be
volatile
from
quarter
to
quarter,
as
they
are
recognized
upon
the
completion
of
project
milestones.
Management
guided
to
at
least
75%
year-over-year
volume
growth,
which
we
think
is
achievable,
given
that
most
of
these
volumes
are
likely
already
contracted.
Finally,
we
slightly
raised
our
2024
deliveries
forecast,
versus
our
prior
forecast
for
no
growth.
Our
improved
outlook
is
due
to
Tesla’s
recent
price
cuts,
so
we
also
slightly
reduced
our
near-term
automotive
gross
margin
forecast.
We
think
Tesla
could
cut
prices
further
as
management
aims
to
pass
along
the
majority
of
cost
savings
to
customers
to
drive
demand.
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