Analysts are closely watching Tesla’s third-quarter deliveries and revising their estimates, which is causing unease among investors. However, it’s essential to look beyond the immediate and consider the outlook for 2024, which seems to be deteriorating.
Deutsche Bank analyst Emmanuel Rosner, remaining optimistic, maintained his Buy rating on Tesla stock (ticker: TSLA) but revised his price target from $300 to $285. While many analysts were already worried about a potential miss in third-quarter deliveries, Rosner’s price target adjustment was driven by a more significant concern.
According to Rosner, there is a real risk of Tesla falling short of Street expectations for its third-quarter 2023 deliveries and production. However, the more critical issue lies in the limited volume growth projected for 2024. “We see meaningful downside risk to 2024 consensus due to limited volume growth next year,” explained Rosner.
His new estimate for third-quarter deliveries now stands at 440,000 units, down from the previous estimate of 455,000 units. This reduction is more severe compared to the current market consensus of 462,000 units, down from the initial estimate of 473,000 units a few weeks ago, as reported by FactSet.
It’s not uncommon for Tesla delivery estimates to be lowered as the end of each quarter approaches. However, this time the cuts for the third quarter are more significant than usual. Analysts attribute this to planned plant downtime to facilitate the change of plant tooling for an upgraded Model 3.
While a weak quarter certainly carries implications, the larger concern lies in the demand forecast for 2024. Recent investor meetings at the Munich auto show revealed that Tesla no longer plans to expand output at its Austin and Berlin factories to 10,000 units per week. As a result, next year’s incremental volume from these two factories will be limited, and the ramp-up for the Cybertruck will be slower and more complex than anticipated.
Rosner stated, “Our base case now is for Tesla to guide to about 2.1 million deliveries next year, versus the current consensus of 2.3 million units.”
In conclusion, the focus on Tesla’s third-quarter deliveries and the subsequent downward revision of estimates are causing concern in the market. However, it’s vital to consider the long-term implications for 2024, as limited volume growth and revised guidance may have a significant impact on Tesla’s performance in the coming year.
Tesla Faces Falling Estimates and Weak Growth
Tesla, the electric vehicle manufacturer, is facing falling estimates and weak growth in the year 2024. Notably, analyst Gary Rosner has cut his estimates by around 9%, which has sparked concerns among investors. However, excluding this reduction, the consensus estimate on Wall Street has only seen a minimal decline of about 2% over the past few weeks.
Challenges Ahead for Tesla
The decline in estimates, along with sluggish production growth and weak Cybertruck deliveries, have presented challenges for Tesla. The company had set a goal of achieving a 50% annual growth rate in vehicle volumes for the next few years. However, with next year’s growth projected to be less than 20% at 2.1 million units, it seems that Tesla may fall short of its target. On a positive note, reducing its volume targets could potentially alleviate pricing pressure for the company.
Price Cuts and Analyst Ratings
To drive demand growth, Tesla aggressively cut prices at the beginning of 2023. However, investors are now hoping for price stabilization and increased demand for Tesla’s electric vehicles. Analysts’ enthusiasm for Tesla stock has been tempered by these price cuts and rising interest rates. Currently, about 41% of analysts rate Tesla shares as a Buy, compared to an average Buy-rating ratio of 55% for stocks in the S&P 500.
Price Targets and Stock Performance
The average analyst price target for Tesla stock is $258, down from $318 a year ago. Despite this decline, Tesla’s stock has performed relatively well, with a year-to-date increase of about 98%. However, over the past 12 months, the stock has experienced a decrease of approximately 13%. In comparison, the S&P 500 and Nasdaq Composite have posted gains of about 17% and 21% respectively during the same period.
In conclusion, Tesla is facing challenges in meeting its growth targets and stabilizing its pricing. While some analysts remain optimistic about the stock, others have expressed concerns about its performance. As the electric vehicle industry continues to evolve, it will be interesting to see how Tesla navigates these obstacles.