Apr 19, 2023

Tesla, Inc.(TSLA) Long Term: 6-12 Months Zacks Recommendation: Outperform

(Since: 04/27/22)
$184.31 (As of 04/18/23)
Prior Recommendation: Neutral
Price Target (6-12 Months): $220.00
Short Term: 1-3 Months Zacks Rank: (1-5) 3-Hold

Zacks Style Scores: VGM:B

Value: C Growth: A Momentum: B

Summary Price, Consensus & Surprise

While Tesla witnessed a massive sell-off last year, its shares
have seen a sharp rebound year to date. The company's
long-term prospects remain solid. The electric vehicle (EV)
king is set to benefit from the soaring popularity of its Models
3 and Y. We expect deliveries to see an annualized growth of
around 33% in 2023. Production ramp-up at gigafactory 4 (in
Berlin) and 5 (in Austin) and introduction of new models,
including Semi and Cybertruck, are set to support long-term
deliveries growth. Additionally, Tesla’s energy generation
and storage revenues outlook is promising. Falling debt levels
is another positive. While inflation and economic concerns
could pose near-term challenges, we expect Tesla to deliver
outsized returns in the long run on the back of output ramp-up
and introduction of new models.

Data Overview Sales and EPS Growth Rates (Y/Y %)

52 Week High-Low $363.54 - $101.81 Sales EPS
20 Day Average Volume (sh) 120,738,768

Market Cap $584.1 B

YTD Price Change 49.6%

Beta 2.00

Dividend / Div Yld $0.00 / 0.0%

Industry Automotive - Domestic

Zacks Industry Rank Bottom 34% (165 out of 250)

Sales Estimates (millions of $)

Last EPS Surprise 9.2%
Q1 Q2 Q3 Q4 Annual*
Last Sales Surprise 2.5%
2024 27,566 E 29,479 E 29,632 E 32,434 E 119,111 E
EPS F1 Est- 4 week change -0.1%
2023 23,254 E 24,196 E 26,036 E 26,318 E 99,804 E
Expected Report Date 04/19/2023
2022 18,756 A 16,934 A 21,454 A 24,318 A 81,462 A
Earnings ESP -0.7%
EPS Estimates
Q1 Q2 Q3 Q4 Annual*
P/E TTM 45.3
2024 0.93 E 0.99 E 0.98 E 1.10 E 4.00 E
P/E F1 55.7
2023 0.73 E 0.80 E 0.87 E 0.91 E 3.31 E
PEG F1 0.9
2022 1.07 A 0.76 A 1.05 A 1.19 A 4.07 A
P/S TTM 7.2 *Quarterly figures may not add up to annual.

The data in the charts and tables, except the estimates, is as of 04/18/2023. The reports text, the analyst-provided estimates, and the price target
are as of 04/19/2023.

© 2023 Zacks Investment Research, All Rights Reserved 10 S. Riverside Plaza Suite 1600 · Chicago, IL 60606
 Overview
Over the years, EV maker Tesla has evolved into a dynamic technology
innovator. It has transformed the EV space much the same way as
Amazon changed the retail landscape and Netflix revolutionized
entertainment. Tesla is the market leader in battery-powered electric car
sales in the United States, with roughly 70% market share. The
company’s flagship Model 3 is the best-selling EV model in the United
States. Tesla, which has managed to garner the reputation of a gold
standard over the years, is now a far bigger entity that what it started off
since its IPO in 2010, with its market cap crossing $1 trillion for the first
time in October 2021. The EV king’s market capitalization is more than
the combined value of legacy automakers including Toyota, Volkswagen,
Daimler, General Motors and Ford.

Over the years, Tesla has shifted from developing niche products for
affluent buyers to making more affordable EVs for the masses. The
firm’s three-pronged business model approach of direct sales, servicing,
and charging its EVs sets it apart from other carmakers. Tesla, which is
touted as the clean energy revolutionary automaker, is much more than
just a car manufacturer. The firm also makes different kinds of
technology like self-driving software, charging stations and battery
development, et al. The technology titan has also made inroads into
solar and energy storage business.

Tesla operates under two segments: Automotive and Energy Generation

& Storage. While Automotive and Energy Generation/Storage operations accounted for 87.7% and 4.8% of the total sales in 2022, respectively,
revenues from Services and Others constituted the rest.

Presently, the Texas-based company produces and sells four fully electric vehicles: The Model S sedan, the Model X sport utility vehicle
(“SUV”), Model 3 sedan and Model Y SUV. Tesla’s future product lineup includes Cybertruck, Semi truck and Roadster.

The firm manufactures its vehicles primarily at facilities located in Fremont, California, Lathrop, Tilburg, Netherlands. Tesla’s first, second and
third Gigafactory are located in Nevada, New York and Shanghai, respectively. Its 4th and 5th Gigafactory are located in Berlin and Austin,
respectively, and commenced production in the fourth-quarter of 2021.

Zacks Equity Research www.zacks.com Page 2 of 9

 Reasons To Buy:
Impressive Deliveries: Banking on the growing adoption of EVs and the soaring popularity of Robust demand for Models
its Models 3 and Y, Tesla has established itself as a leader in the e-mobility space. The 3 and Y is buoying Tesla's
automaker is riding on the robust demand for Models 3 and Y, which form a major chunk of its revenues. Falling debt
total deliveries. Deliveries of Model 3/Y witnessed a CAGR of more than 100% over the last 3 levels also augur well.
years. Despite supply chain disruptions and economic challenges, total deliveries grew 40.3%
year over year to more than 1.3 million units in 2022. We expect deliveries to grow roughly
33% year over year this year. Production ramp-up at gigafactory 4 (in Berlin) and 5 (in Austin)
and introduction of new models, including Semi and Cybertruck, are set to support deliveries growth in the coming years.

Price Cuts Sparking Demand: To counter rising interest rates which has made the cost of financing vehicles expensive, Tesla has been
lately resorting to price cuts on most of its models to spur demand. With the vehicles getting more affordable, the company is witnessing
strong orders. Not only are these price cuts making its cars more competitive compared with rivals’, but the price will also make several of its
models eligible for the $7,500 tax rebates (allowed on EVs under 55,000 and electric SUVs and trucks under $80,000).

Automotive Revenues Growth: Tesla's automotive revenues, which represent roughly 90% of the company’s total revenues, is boosting
the overall results. Thanks to strong deliveries, we believe Tesla would maintain its upward trajectory in automotive revenues. After recording
more than 51% growth in 2022, we expect automotive revenues to rise close to 23% this year. Our projections indicate automotive revenues
to grow around 20% in 2024 and another 7% in 2025.

Beyond Automotive Business: Tesla’s energy generation and storage revenues are also growing thanks to the positive reception of
Megapack and Powerwall products. Energy storage deployments have risen at a CAGR of 47% between 2020 and 2022. The company is
ramping up production at a dedicated Megapack factory to meet the mounting demand. We expect the deployments to grow more than 60%
in 2023, thereby boosting revenues.

Strengthening Balance Sheet: Falling debt levels is another positive. Long-term debt and finance leases, net of the current portion totaled
$1,597 million as of 2022 end, down from $5,245 million as of 2021 end. Its long-term debt-to-capitalization of around 5% compares favorably
with the industry’s 41%. Low leverage provides the firm with the financial flexibility to tap onto growth opportunities. In fact, Musk stated
during Q3’22 that the company is also contemplating a buyback in the range of $5 billion-$10 billion.

Zacks Equity Research www.zacks.com Page 3 of 9

 Risks
Commodity Cost Inflation:Rising commodity costs is acting as a spoiler. We expect the cost of goods sold in the automotive segment to
rise roughly 29% year over year in 2023. Along with rising costs of raw materials, inefficiencies at Austin and Berlin gigafactories as well as
in-house cell production factories are playing deterrents. Also, Tesla’s vehicle mix has been tilting heavily toward Model Y lately. As the
manufacturing cost of Model Y is more than the Model 3, overall COGS is on the rise. Amid the rising costs, gross margins are bearing a
brunt. Our projections indicate automotive gross margins of around 25.4% in 2023, implying a decline of 340 basis points year over year.

Escalating R&D Expenses & Capex: Tesla’s research and development expenses are consistently rising and the trend is expected to
continue as the EV giant makes efforts to boost output capacity at its gigafactories, ramp up 4680 battery cells production, and enhance
the Supercharger infrastructure. We expect R&D costs to flare up roughly 67% this year, which is likely to clip margins. The company itself
acknowledges that its near-term operating margin will be under pressure. Our estimates imply operating margins of 13.2% in 2023,
declining from 16.8% in 2022.

Rising Competition: There could be the increasing competition from traditional automakers like General Motors and Ford as well as
emerging players like Rivian and Lucid in a market that Tesla has dominated until now. Therefore, Tesla is the only one with share to lose.
All other players are gaining market share at its expense. It should be noted here that Tesla's market share dropped from around 70% in
2021 to roughly 63% in 2022. The company’s dominant market position is likely to become thinner thanks to stiff competition.

China Market Concerns: There are concerns with respect to the China market, which is full of home-grown players like NIO, XPeng and
Li among others. Chinese players are seeing strong growth in their home turf and are getting ready to expand in international markets,
mainly Europe and other Asian countries. As China is a big market for Tesla, so the stiff competition is likely to erode its market share in
the country. Supply chain disruptions amid China’s COVID saga may also play killjoy.

Zacks Equity Research www.zacks.com Page 4 of 9

 Last Earnings Report
Tesla Delivers Yet Another Stellar Show in Q4 Quarter Ending 12/2022

Tesla reported fourth-quarter 2022 earnings of $1.19 a share, up from the year-ago figure of 85 Report Date Jan 25, 2023
cents and surpassing the Zacks Consensus Estimate of $1.09. This marked an earnings beat for Sales Surprise 2.48%
the electric vehicle (EV) behemoth for the eighth time in a row. Higher-than-expected revenues EPS Surprise 9.17%
from Energy Generation/Storage and Services/Other segments resulted in this outperformance.
Quarterly EPS 1.19
Our estimate for the bottom line was 83 cents a share.
Annual EPS (TTM) 4.07
Total revenues came in at $24,318 million, witnessing year-over-year growth of 37.2%. The top
line also crossed the consensus mark of $23,729 million. Our estimate for the revenues was
$22,404 million. Tesla reported an overall gross margin of 23.8% for the reported quarter. The operating margin came in at 16%.

Management sticks to its target of around 50% growth in deliveries in the foreseeable future. For 2023, it expects deliveries to reach 1.8 million
units.

Key Takeaways

Tesla’s production and delivery totaled 439,701 and 405,278 vehicles, reflecting a year-over-year jump of 44% and 31%, respectively. The
Model 3/Y registered production and deliveries of 419,088 and 388,131 vehicles, marking year-over-year growth of 43% and 31%, respectively.
Production and delivery of the Model S/X totaled 20,613 and 17,147 units, respectively, in the quarter under review.

Total automotive revenues of $21,307 million missed the consensus mark of $21,325 million but jumped 33% year over year. The figure also
included $467 million from the sale of regulatory credits for electric vehicles, which rose 49% year over year. Automotive gross profit came in at
$5,522 million, which missed the consensus mark of $5,837 million. Automotive gross margin came in at 25.9%, contracting 466 basis points
from fourth-quarter 2021.

Energy Generation and Storage revenues came in at $1,310 million in fourth-quarter 2022 compared with the year-ago quarter’s figure of $688
million. The figure beat the consensus mark of $911 million. Services and Other revenues were $1,701 million, significantly increasing from
$1,064 million a year ago. The figure also topped the consensus mark of $1,490 million.

Operating expenses totaled $1,876 million in the reported quarter, down from $2,234 million incurred in the corresponding period of 2021.

Financials

Tesla had cash and cash equivalents of $22,185 million as of Dec 31, 2022, compared with $17,707 million on Dec 31, 2021. Net cash provided
by operating activities amounted to $3,278 million in fourth-quarter 2022, declining 28.5% year over year. Its capital expenditure totaled $1,858
million, compared with $1,810 million recorded in fourth-quarter 2021.

Tesla generated a free cash flow of $1,420 million during the reported quarter, falling 48.8% year over year. Long-term debt and finance leases,
net of current portion, totaled $1,597 million, down from $5,245 million on Dec 31, 2021.

Zacks Equity Research www.zacks.com Page 5 of 9

 Valuation
Tesla shares are up 49.7% and down 43.4% year to date and in the trailing 12-month period, respectively. Stocks in the Zacks Automotive-
Domestic industry and the Zacks Auto-Tires-Trucks sector are up 22.2% and 14.9%, respectively, year to date. Over the past year, the Zacks sub
industry and sector are down 47.6% and 37.9%, respectively. The S&P 500 index is up 8.6% and down 7.4% year to date and in the past year,
respectively.
The stock is currently trading at 5.4X forward 12-month price to sales ratio, which compares to 1.21X for the Zacks sub-industry, 1X for the Zacks
sector and 3.64X for the S&P 500 index.
Over the past five years, the stock has traded as high as 23.37X and as low as 1.1X, with a 5-year median of 5.71X. Our Outperform
recommendation indicates that the stock will perform better than the market. Our $220 price target reflects 2.20X our 2023 sales estimate.
The table below shows summary valuation data for TSLA:

Zacks Equity Research www.zacks.com Page 6 of 9

 Industry Analysis Zacks Industry Rank: Bottom 34% (165 out of 250) Top Peers
Company (Ticker) Rec Rank
Ford Motor Company (F) Outperform

Volkswagen AG Unsponsored ADR Outperform

(VWAGY)
General Motors Company (GM) Neutral

Honda Motor Co., Ltd. (HMC) Neutral

Harley-Davidson, Inc. (HOG) Neutral

PACCAR Inc. (PCAR) Neutral

Stellantis N.V. (STLA) Neutral

Toyota Motor Corporation (TM) Neutral

Industry Comparison Industry: Automotive - Domestic Industry Peers

TSLA X Industry S&P 500 F GM TM

Zacks Recommendation (Long Term) Outperform - - Outperform Neutral Neutral

Zacks Rank (Short Term) - -

VGM Score - -
Market Cap 584.14 B 414.56 M 30.75 B 50.74 B 49.27 B NA
# of Analysts 12 3 14 6 6 4
Dividend Yield 0.00% 0.00% 1.71% 4.71% 1.02% 2.28%
Value Score - -
Cash/Price 0.04 0.32 0.04 0.88 0.65 NA
EV/EBITDA 31.92 -0.27 13.61 20.16 4.08 NA
PEG Ratio 0.92 1.48 2.10 1.59 0.58 2.07
Price/Book (P/B) 12.82 1.18 3.21 1.18 0.69 0.92
Price/Cash Flow (P/CF) 35.77 7.37 12.54 3.60 2.11 4.61
P/E (F1) 55.68 10.90 18.01 8.28 5.69 8.67
Price/Sales (P/S) 7.17 2.78 2.52 0.32 0.31 NA
Earnings Yield 2.08% -17.08% 5.52% 12.10% 17.58% 11.54%
Debt/Equity 0.04 0.18 0.62 2.06 1.06 0.58
Cash Flow ($/share) 5.15 -0.55 9.02 3.54 16.75 29.76
Growth Score - -
Hist. EPS Growth (3-5 yrs) 348.70% 3.89% 10.59% 4.05% 3.73% 5.20%
Proj. EPS Growth (F1/F0) -18.67% 12.35% 5.23% -18.09% -18.18% -25.05%
Curr. Cash Flow Growth 93.39% 11.54% 6.70% 13.89% 4.10% 13.55%
Hist. Cash Flow Growth (3-5 yrs) 148.25% 7.82% 9.85% -2.10% 1.07% 5.44%
Current Ratio 1.53 1.73 1.22 1.20 1.10 1.09
Debt/Capital 4.22% 20.20% 39.72% 67.29% 51.47% 36.79%
Net Margin 15.41% -50.05% 12.12% -1.25% 6.34% 6.85%
Return on Equity 31.71% -40.90% 18.00% 17.45% 16.08% 8.55%
Sales/Assets 1.12 0.29 0.55 0.63 0.61 0.49
Proj. Sales Growth (F1/F0) 22.50% 7.94% 4.66% 0.50% 3.20% -2.50%
Momentum Score - -
Daily Price Chg -1.46% 0.47% 0.09% 0.39% 0.54% -0.52%
1 Week Price Chg -0.03% 0.52% 1.12% 1.54% -0.29% -2.10%
4 Week Price Chg -6.72% -1.06% 3.80% 8.62% 0.66% 0.93%
12 Week Price Chg 28.09% -11.91% 3.43% -0.08% -2.40% -6.14%
52 Week Price Chg -46.22% -56.77% -6.89% -21.18% -16.04% -20.07%
20 Day Average Volume 120,738,768 1,176,219 1,785,374 53,216,584 11,125,066 229,704
(F1) EPS Est 1 week change 0.06% 0.00% 0.00% 2.46% 0.00% 1.02%
(F1) EPS Est 4 week change -0.06% 0.00% 0.00% 1.97% 0.00% 1.02%
(F1) EPS Est 12 week change -18.01% 1.24% -0.86% -11.30% 6.52% -1.23%
(Q1) EPS Est Mthly Chg 0.62% 0.00% 0.00% 11.63% 0.00% 0.00%

Zacks Equity Research www.zacks.com Page 7 of 9

 Analyst Earnings Model

Zacks Equity Research www.zacks.com Page 8 of 9

 Zacks Stock Rating System
We offer two rating systems that take into account investors' holding horizons: Zacks Rank and Zacks Recommendation. Each provides valuable
insights into the future profitability of the stock and can be used separately or in combination with each other depending on your investment style.

Zacks Recommendation
The Zacks Recommendation aims to predict performance over the next 6 to 12 months. The foundation for the quantitatively determined Zacks
Recommendation is trends in the company's estimate revisions and earnings outlook. The Zacks Recommendation is broken down into 3 Levels;
Outperform, Neutral and Underperform. Unlike many Wall Street firms, we have an excellent balance between the number of Outperform and
Neutral recommendations. Our team of 70 analysts are fully versed in the benefits of earnings estimate revisions and how that is harnessed
through the Zacks quantitative rating system. But we have given our analysts the ability to override the Zacks Recommendation for the 1200
stocks that they follow. The reason for the analyst over-rides is that there are often factors such as valuation, industry conditions and
management effectiveness that a trained investment professional can spot better than a quantitative model.

Zacks Rank
The Zacks Rank is our short-term rating system that is most effective over the one- to three-month holding horizon. The underlying driver for the
quantitatively-determined Zacks Rank is the same as the Zacks Recommendation, and reflects trends in earnings estimate revisions.

Zacks Style Scores Value Score

The Zacks Style Score is as a complementary indicator to the Zacks rating system, giving investors a way
Growth Score
to focus on the highest rated stocks that best fit their own stock picking preferences.
Momentum Score
Academic research has proven that stocks with the best Value, Growth and Momentum characteristics
outperform the market. The Zacks Style Scores rate stocks on each of these individual styles and assigns VGM Score
a rating of A, B, C, D and F. We also produce the VGM Score (V for Value, G for Growth and M for
Momentum), which combines the weighted average of the individual Style Scores into one score. This is
perfectly suited for those who want their stocks to have the best scores across the board.

As an investor, you want to buy stocks with the highest probability of success. That means buying stocks with a Zacks Recommendation of
Outperform, which also has a Style Score of an A or a B.

Disclosures
This report contains independent commentary to be used for informational purposes only. The analysts contributing to this report do
not hold any shares of this stock. The analysts contributing to this report do not serve on the board of the company that issued this
stock.The EPS and revenue forecasts are the Zacks Consensus estimates, unless indicated otherwise on the reports first page.
Additionally, the analysts contributing to this report certify that the views expressed herein accurately reflect the analysts personal views as to the
subject securities and issuers. ZIR certifies that no part of the analysts compensation was, is, or will be, directly or indirectly, related to the
specific recommendation or views expressed by the analyst in the report.

Additional information on the securities mentioned in this report is available upon request. This report is based on data obtained from sources we
believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete. Any opinions expressed herein are subject to
change.

ZIR is not an investment advisor and the report should not be construed as advice designed to meet the particular investment needs of any
investor. Prior to making any investment decision, you are advised to consult with your broker, investment advisor, or other appropriate tax or
financial professional to determine the suitability of any investment.This report and others like it are published regularly and not in response to
episodic market activity or events affecting the securities industry.

This report is not to be construed as an offer or the solicitation of an offer to buy or sell the securities herein mentioned. ZIR or its officers,
employees or customers may have a position long or short in the securities mentioned and buy or sell the securities from time to time.ZIR is not a
broker-dealer.ZIR may enter into arms-length agreements with broker-dealers to provide this research to their clients.Zacks and its staff are not
involved in investment banking activities for the stock issuer covered in this report.

ZIR uses the following rating system for the securities it covers. Outperform- ZIR expects that the subject company will outperform the broader
U.S. equities markets over the next six to twelve months. Neutral- ZIR expects that the company will perform in line with the broader U.S.
equities markets over the next six to twelve months. Underperform- ZIR expects the company will underperform the broader U.S. equities
markets over the next six to twelve months.

No part of this report can be reprinted, republished or transmitted electronically without the prior written authorization of ZIR.

Zacks Equity Research www.zacks.com Page 9 of 9