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Stay-at-home orders forced the temporary closure of both Tesla’s Freemont, California, and Shanghai factories, snarling production and potentially impacting sales.
“Tesla (and every auto manufacturer) continues to navigate an unprecedented COVID-19 sales environment that has temporarily closed its flagship Fremont factory and forced the company to make tough decisions such as furloughs and salary cuts to limit near term cash burn and red ink,” wrote Dan Ives, a New York-based analyst at Wedbush Securities.
Shares of the Palo Alto, California-based electric-vehicle maker have rallied by 119 percent since bottoming out on March 18 at $361.22 apiece as investors have begun to price in the possibility that the worst of the damage caused by the COVID-19 pandemic is over.
Demand and production at Tesla’s Shanghai Gigafactory are “starting to significantly rebound,” according to Ives, and the stay-at-home order in the San Francisco area is scheduled to be lifted on May 3, meaning production will soon restart at its California plant. There are reports the automaker may even try to restart production this week.
With production starting to ramp back up, Morgan Stanley analyst Adam Jonas told clients that Wall Street will be focused on two items – Tesla’s full-year delivery guidance and how much cash the company burned during the first quarter.
While Jonas says it would be “out of step” for Tesla to reduce its forecast, he expects the company to do so. Tesla in January forecast 2020 deliveries to “comfortably exceed 500,000 units,” but the consensus estimate has fallen to 400,000 due to disruptions caused by COVID-19.
Jonas believes any number in the 420,000 to 450,000 range would garner a positive reaction from investors, giving them “more confidence” around a second-half recovery in demand.
Tesla earlier this month reported 88,400 deliveries, the most for a first quarter in the company’s history. That number easily exceeded the 79,908 consensus estimate. The automaker did not provide an updated forecast for 2020 deliveries.
“In a brutal environment, these recent 1Q delivery numbers were a sigh of relief for the bulls as evidenced by the parabolic move in the stock higher and now all eyes shift to earnings and the fundamental profile for Tesla over the coming quarters,” Wedbush’s Ives, who has a “neutral” rating and 12-month price target of $425, wrote.
Tesla is expected to report a first-quarter loss of 36 cents a share on revenue of $5.90 billion, according to analysts surveyed by Refinitiv. The electric-car maker lost $1.77 per share on sales of $4.54 billion a year ago.
Tesla shares were up 73 percent year-to-date through Friday, outperforming the S&P 500’s 12 percent loss.