Analysts ignore Musk’s lockdown rant to praise Tesla results

Wall Street brokerages on Thursday brushed aside a coronavirus lockdown rant by Tesla CEO Elon Musk to give a resounding thumbs-up to the electric carmaker’s first-quarter numbers.

Slipping into profanity on a call with analysts after the results were released on Wednesday, Musk called current stay-at-home orders “fascist” and said it was a serious risk to the business.

“To say that they cannot leave their house and they will be arrested if they do, this is fascist. This is not democratic, this is not freedom. Give people back their goddamn freedom!” he said. 

Musk tweeted on March 6 that “the coronavirus panic is dumb” but later offered to supply hospitals with free ventilators.

Tesla said it could not predict how quickly vehicle manufacturing and global supply chains will normalise, saying it would revisit full-year guidance for net income and cash flow when it reports current-quarter results in three months.

Musk said that while other carmakers were cutting back, Telsa was ramping up investment and that the carmaker might announce the location of a new US factory in one to three months.

Musk’s remarks come around a year after Tesla managed to end a series of legal and regulatory rows over Musk’s social media posting by agreeing to restrictions with regulators.

A morning round of research notes from major investment banks saw analysts avoid the issue and focus on the fundamentals of Tesla’s business.

Analysts with JP Morgan said important take-aways included its “unexpectedly higher” regulatory credits of $354m in the quarter.

Regulatory credits is the money Tesla receives from other automakers that buy the company’s carbon emissions credits to meet stricter regulation.

“The highlight of the result was a solid gross margin beat,” Credit Suisse analysts wrote, saying gross margins on both the Model Y compact utility vehicle and its China-made Model 3 had come as a positive surprise.

Tesla’s market cap currently stands at around $147.38bn, according to Refinitiv data.

The company’s third profit beat in a row comes at a time when the COVID-19 pandemic has hammered auto sales and production in the United States.

Canaccord Genuity said the strong gross margin at 20.6 percent was proof of “a meaningful operational improvement that the company has made over the past several quarters”.

Company-wide automotive gross margins in the first quarter jumped to 25.5 percent.

Tesla said on Wednesday it would revisit its outlook for net income and cash flow in its next quarterly earnings.

Another brokerage, Wedbush, predicted that Tesla would miss its 2020 vehicle delivery target of 500,000, saying it was a “virtual impossibility” that the carmaker would hit those numbers, given the worldwide slump in demand.

“Although the rest of the world is essentially shut down and in lockdown mode, strong Model 3 demand out of China remains a ray of light for Tesla in a dark global macro,” the brokerage said.