Tesla Inc (NASDAQ:TSLA) and Facebook Inc (NASDAQ:FB) served up first quarter results for 2017 on Wednesday, and even in face of Tesla’s earnings miss and Facebook’s occasional reporting metric flounders, it is clear to analysts that these titans remain strong leaders investors should keep backing for the long-term. In fact, Guggenheim and Wells Fargo alike are pressing the lift button on price target estimates for these two heavyweight stock players, expecting Tesla’s Model 3 and Facebook’s better pricing to be key assets driving stock valuation ahead. Let’s dive in:
Tesla’s Pivotal Weapon
Tesla delivered its first quarter print for the year on Wednesday that sent shares down 5% on weaker earnings. Yet, as Tesla revs its gears toward the Model 3 launch, Guggenheim analyst Rob Cihra is out with a more confident note than ever, as he pinpoints the Model 3 as the electric car giant’s “ultimate leverage.”
With Tesla taking “one step closer to Model 3,” the analyst reiterates a Buy rating on shares of TSLA while upping the price target from $320 to $380, which represents a 28% increase from where the stock is currently trading.
For the first quarter of the year, the giant posted $2.70 billion in revenue, marking a 135% year-over-year rise and non-GAAP EPS of ($1.33). However, the analyst calculates EPS of ($1.74), because he takes out the accounting increase from SolarCity non-controlling interests.
Meanwhile, all-in revenue topped consensus and the analyst’s expectations of $2.61 to $2.66 billion by a hair, but brought in EPS 12 cents under the analyst’s forecast. Cihra attributes this dip to a rise in operating expenses. 25k vehicle deliveries, indicating a 69% year-over-year rise, came in just as CEO Elon Musk had pre-announced, which aligns with the giant’s goal to achieve 47 to 50k units in the first half of this year.
For 2017, the analyst has lowered his EPS forecast from ($5.80) to ($7.24), but “barely” adjusts his revenue estimate of $12.2 billion, which would denote a 75% year-over-year rise- one the analyst anticipates will jump to an 89% year-over-year rise by next year with EPS improving to ($2.26).
From Cihra’s viewpoint, “We continue to believe it is Tesla’s 2019-20E EPS that really ‘matter,’ since they start to capture the expected revenue and fixed-cost leverage of Model 3 ramping in high volumes.” As such, the analyst boosts his 2019 revenue estimate to $34.6 billion and EPS to $11.53 on 550K units while introducing 2020 estimates for revenue of $43.2 billion and EPS of $19.54 on back of a projected over 720K units.
Ultimately, “With Tesla’s high-end Model S + X practically still battery EV proofs of concept, we continue to focus on Model 3 as the more accessible ‘mainstream’ car Tesla has been working toward this whole time. Priced starting at $35K, just slightly above the $33-34K average price of a new car in the U.S. (although optioned-up we estimate blended ASP $44K), Model 3 is designed with less complexity, a smaller battery pack, smaller body, less aluminum, less wiring (1.5km vs. 3km), etc. than the S, yet the same software, but most critically, was designed from the outset for ease and cost of manufacturing,” contends Cihra, who remains bullish on Tesla shares moving forward.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Rob Cihra is ranked #807 out of 4,561 analysts. Cihra has a 59% success rate and gains 10.0% in his yearly returns. When suggesting TSLA, Cihra garners 14.3% in average profits on the stock.
Tesla analytics show TSLA as a Hold. Out of 17 analysts polled by TipRanks in the last 3 months, 5 are bullish on Tesla stock, 6 remain sidelined, and 6 are bearish on the stock. With a loss potential of nearly 10%, the stock’s consensus target price stands at $267.50.
Facebook Racks Up More Share Gains
Facebook posted first quarter earnings on Wednesday, revealing its continued momentum for user growth coupled with share gains that have Wells Fargo analyst Peter Stabler crooning praises for CEO Mark Zuckerberg’s brainchild.
In reaction to earnings, the analyst reiterates an Outperform rating on FB while raising the valuation range from $155 to $160 up to $165 to $175, which represents a 9% to 16% increase from where the shares last closed.
For the first quarter, the social media titan’s advertising revenue “easily beat” both the analyst’s and Street projections, topping Stabler’s expectations by 3% and the Street by 2%. Furthermore, adjusted EBITDA outclassed both the analyst’s forecast by 5% and the Street’s by 2%. Reported GAAP EPS of $1.04 steadily outperformed the analyst’s forecast of $0.88 and the Street’s of $0.87.
For Stabler, ad-load growth declines equate to year pricing gains, and with expectations for a more significantly than initially expected slowdown in North America, the analyst is calling for GAAP EPS estimates of $4.75 for 2017 and $5.29 for 2018, a rise from $4.54 first expected for 2017 and $5.10 for 2018. Revenue catalyst signs all point to pricing.
Stabler notes, “We believe investor expectations were high heading into yesterday’s (5/3) earnings release as recent results from Google and commentary from third party marketing developers and ad agencies pointed to continued investments behind FB’s suite of ad products.”
Moreover, “We continue to view FB as having relatively low effective impression pricing given the company’s audience breadth, deep targeting capabilities, and expanding range of ad formats—a combination of assets that we believe has elevated FB to become an ‘always on’ media plan component for virtually every significant marketer globally, with ambition to play a similar role for SMBs (small/medium businesses) worldwide,” highlights the analyst.
Acknowledging stumbles along the way, Stabler wholly remains in Facebook’s corner, concluding, “Though FB has suffered some missteps associated with select campaign reporting metrics—none impacting billing—we continue to view FB’s measurement offering as a critical competitive advantage vs. large platform peers.”
As usual, we like to include the analyst’s track performance when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, five-star analyst Peter Stabler is ranked #235 out of 4,561 analysts. Stabler has a 79% success rate and realizes 23.6% in his yearly returns. When recommending FB, Stabler yields 47.3% in average profits on the stock.
Tesla analytics indicate FB as a Strong Buy. Based on 28 analysts polled by TipRanks in the last 3 months, 27 rate a Buy on Facebook while 1 maintains a Hold. The 12-month average price target stands at $170.27, marking a nearly 13% upside from where the shares last closed.