The global semiconductor supply constraint is taking a toll on automakers across the globe, barring Tesla (TSLA). The EV giant continues to produce and deliver a record number of vehicles and is navigating the supply challenges very well. Therefore, I maintain a Bullish outlook on Tesla stock.  

It’s worth noting that rival General Motors (GM) delivered 446,997 vehicles in the U.S. in Q3. This represents a year-over-year decline of 33%. Meanwhile, Ford’s (F) sales declined about 27% during the same period. 

In comparison, Tesla’s Q3 production and deliveries increased by 64% and 73%, respectively, on a year-over-year basis. It produced 237,823 vehicles, while its delivery count stood at 241,300.

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In response to its Q3 deliveries, Jefferies analyst Philippe Houchois said that Tesla’s Q3 volumes indicate that the company “continues to navigate supply constraints comparatively well.” The analyst added that Tesla exceeded Q3 volume expectations and is handling the supply “shortage relatively better than most, possibly with the help of parallel sourcing for chips of Tesla’s own design.”

Notably, Tesla is countering the chip shortage issue by substituting alternative chips. Tesla's CEO, Elon Musk, stated during the Q2 conference call that “it was an incredibly intense effort of finding new chips, writing new firmware, integrating with the vehicle and testing in order to maintain production.”

Also, as Tesla uses the same chips in both Powerwall and cars, it reduced Powerwall production and prioritized car production to meet demand amid semiconductor supply issues. 

Looking ahead, Houchois expects Tesla to report automotive revenues of $12.5 billion in Q3, reflecting a sequential and year-over-year growth of 22% and 63%, respectively. 

Houchois has a Buy rating on Tesla stock with a price target of $850 (8.8% upside potential). 

Meanwhile, on TipRanks, TSLA stock has an analyst rating consensus of Hold, based on 12 Buys, 7 Holds, and 7 Sells. The average Tesla price target of $690.64 implies 11.6% downside potential to current levels.

Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.

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The post Tesla: Cruising through Supply Constraint appeared first on TipRanks Financial Blog.

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By: Amit Singh
Title: Tesla: Cruising through Supply Constraint
Sourced From: blog.tipranks.com/tesla-cruising-through-supply-constraint/
Published Date: Tue, 05 Oct 2021 07:07:48 +0000

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