Tesla stock (TSLA) closed little changed after a full-day gain after three separate reports boosted the stock.
Production in Shanghai is improving
First, a report from the China Passenger Car Association came out of Asia, reporting that Tesla sold 32,165 vehicles made in China in May. The figure also includes 22,340 vehicles built for export to regions such as Europe.
Tesla’s Shanghai Gigafactory more than tripled production in May as it was closed for much of March and April due to the COVID-19 shutdown in Shanghai. Although the plant reopened on April 19, it was unable to ramp up production to pre-lockdown conditions.
Production at the Shanghai plant remained below normal in May, although another silver lining for Tesla to operate and return to normal in China is that the “closed-loop” system the company has adopted is coming to an end.
The South China Morning Post reports that the Gigafactory will “close the loop” on June 11, meaning thousands of Teslas will now be able to commute to the factory again from home instead of living in a dorm near the factory.
Back in the US last night, CEO Elon Musk delivered more positive news for investors at a company-wide meeting. As the end of the quarter approached, an employee asked Musk if the supply cycle would be shortened so the company could avoid the now-typical “crazy end-of-quarter supply surge.”
Musk went on to say that Tesla expects a much smaller wave in the next quarter as the Berlin Gigafactory expands and frees up Shanghai capacity to balance exports to Europe.
On the upside for investors, a “crazy” end-of-quarter surge in deliveries typically yields solid quarterly earnings for Tesla, meaning the company may be surprised when it reports second-quarter deliveries next month.
Last quarter, the company recorded another record total of 310,000 deliveries, although The Street expects deliveries to be down around 304,000 this quarter due to the COVID shutdown.
Finally, Tesla shares got a boost from Wall Street when UBS analyst Patrick Hummel declared “it’s time to be bold” and upgraded the stock to buy from neutral.
Although the stock is down about 35% so far this year, Hummel sees the company’s second-quarter operating outlook better than ever
Within this range, Hummel is bullish on several other areas. Hummel believes Tesla has “structural” advantages in its business, such as vertical integration in areas such as chips, software and battery production. Looking ahead, Hummel sees the company’s “innovation pipeline” as well as news about autonomous driving and its humanoid robot, the Cybertruck, as well as steep upward curves in Berlin and Austin as “share price drivers” going forward.
In the end, Hummel believes that Tesla stock currently represents a valuation decision, and today’s price is an attractive entry point into what he calls a “solid, high-growth business.” Hummel is sticking to its $1,100 price target, which suggests a healthy 47% potential upside from here.