Tesla plans for another stock split, while Jefferies adjust its price target lower to $1,050

Tesla plans to discuss the proposal of the stock split at its shareholder meeting on August 2nd, according to documents submitted to regulators published on Friday, June 10 EST. If the proposed stock split is approved, it will be Tesla's first stock split since Aug 30th, 2020. The market expects shareholders to approve the stock split, judging from the stock's reaction on Friday. Jefferies, Credit Suisse, and Morgan Stanley have given price targets of $1,050, $1,125, and $1,300, respectively.

Jefferies believes that Tesla can accelerate FCF growth by improving working capital or reducing CAPEX and with the consolidation/contraction of traditional OEMs and faster self-funding into non-automotive markets. But with the current delivery period of 4-6 months, the performance is not impressive. The ~50% CAGR and 2021-23 Capex-led units should have generated an after-tax return on capital of over 60%.

Credit Suisse believes that suppliers are key to Tesla's transition to using the 4680-battery phase, which will also be a long transition. On the profit side, Tesla should see continued cost increases as well as profit increases in Berlin and Austin. In addition, Tesla may benefit from deferred revenue from the FSD release before the end of the year.

Morgan Stanley believes that investors are encouraged to discount gross margins (which may top out in 1Q) due to recent disruptions in production, rising input costs, ramp costs in Berlin and Austin, and other factors. While we would still say that demand for Tesla vehicles exceeds their production capacity, this is not necessarily mutually exclusive with Tesla's ability to control costs in the future.