With just days to go for the release of Tesla, Inc.’s TSLA first-quarter deliveries update, an analyst on Wednesday reaffirmed his bullish stance but reduced the price target for the stock.
The Tesla Analyst: Wedbush analyst Daniel Ives maintained an Outperform rating on the stock and cut his price target from $315 to $300.
Twin Troubles: Tesla has been haunted by both demand and supply-side issues, said Ives in a note. The first quarter has been nightmarish for Tesla as China demand remained very soft from the beginning of the quarter, and factory planned downtimes and the Berlin fire have impacted supply, he said.
“There is no denying this has been a quarter to forget for Musk and Tesla,” the analyst said.
The weakness may have been exacerbated by the Model 3 Highland upgrade issues in the Fremont factory and flattish sales in Europe, he added.
As such, the analyst reduced his first-quarter delivery estimates from 475,000 units to 425,000 units, citing a “perfect storm” of demand issues that hit the quarter, which in turn hurt delivery and sales.
See Also: Everything You Need To Know About Tesla Stock
China – Thorn In Flesh: The biggest and most concerning issue for Tesla and its investors is the rising competition in China and a lingering price war here that has made the company’s key market very challenging for it last year as well as in the first quarter, Ives said.
The analyst said as opposed to the 2.1 million-unit estimate for the year, a 2-million number now looked more like a “realistic” target.
China deliveries may have been down 3-4% year-over-year in the first quarter, Ives said.
Negative Narrative Justified? As such, the first-quarter deliveries will not be a “moment of celebration for the bulls and instead be a rip the band-aid quarter for Tesla investors,” Ives said.
“We believe the Tesla narrative is as negative as we have seen in the last few years with [Elon] Musk/Tesla getting attacked by the bears from all directions,” the analyst said, adding “But unlike other times, now it’s warranted as growth has been sluggish and margins showing compression with China a nightmare.”
“For Musk, this is a fork-in-the-road time to get Tesla through this turbulent period. Otherwise, darker days could be ahead,” Ives said.
The analyst is, however, confident in the long term. “We have a high level of confidence in the FSD/autopilot strategy at Tesla and ultimately this holds the future promise and valuation support that remains at the epicenter of this disruptive tech story,” he said.
For a turnaround, the analyst recommended the following:
- Tesla needs to give a formal guidance range for margins and deliveries in 2024
- have a 1Q conference call that delves into the demand issues in China and the strategy to reverse this trend,
- hold a battery/AI day for the Street to give investors the roadmap and monetization path
- the next few years
- Musk needs to commit to being CEO of Tesla for the next 3-5 years, including its AI endeavors
- Start a real advertising campaign
Ives said. “We remain bullish on Tesla over the next few years…Our view is that Tesla’s stronghold of the EV market will accelerate and margins will trough with FSD/AI software growth key going forward.”
“However, getting through this white knuckle period will be a defining chapter for Musk & Co. and the future of Tesla.”
Tesla Price Action: Tesla ended Wednesday’s session up 1.22% at $179.83, according to Benzinga Pro data. The stock is down nearly 28% for the year-to-period.
Image via photos on Shutterstock
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
date | ticker | name | Price Target | Upside/Downside | Recommendation | Firm |
|---|
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
