Tesla Struggles with Delivery Goals and AI Tech Expectations, Analysts Adjust Financial Forecasts

Truist Securities analyst William Stein reiterated Tesla Inc TSLA with a Hold and lowered the price target from $193 to $176.

On April 2, Tesla reported first-quarter 2024 deliveries 15.4% below FactSet consensus, citing various factors. 

This, combined with Stein’s proprietary ASP analysis, led him to reduce his annual unit delivery, revenue, & EPS estimates for calendar year 2024 & calendar year 2025.

Longer-term, he noted Tesla as a significant supplier of AI tech. Unfortunately, pricing & demand dynamics diminish the value of the automotive business and AI updates continue to disappoint. 

Also Read: Tesla Plans Site Scouting In India For New EV Plant: Report

The next catalysts would be the unveiling & sale of the next-gen vehicle, which is close from near-term events, as per the analyst.

The press release blamed the decline in volumes as partially due to the early phase of the production ramp of the updated Model 3 at its Fremont factory, combined with factory shutdowns resulting from shipping diversions caused by the Red Sea conflict and an arson attack at Gigafactory Berlin. 

Still, he insisted on reconciliation of these production-related issues quickly with the quarter’s inventory build.

Stein’s data analysis suggests that ASPs fell slightly less than previously expected. 

His analysis indicates that many price cuts occurred in the Chinese region. Looking forward, he expects second-quarter ASPs to decline by another 1%; he expects Tesla to continue flexing pricing to stimulate demand.

Lower unit assumptions through calendar 2024-25 combined with updated ASP expectations take his 2025 EPS to $4.36 (from $5.40). 

In the near term, the analyst expects rates and TSLA’s pricing strategy to pressure the company’s profitability. In the medium term, updates on AI prolong the enormous potential benefits of AI to Tesla’s financials. 

HSBC analyst Michael Tyndall maintained Tesla with a Reduce rating and lowered the price target from $143 to $138.

The analyst noted continuing earnings pressure amid softening growth and aggressive pricing.

The first quarter of 2024 saw Tesla’s deliveries fall short, reaching only 387k units, a decline of 9% year-over-year and 20% quarter-over-quarter, missing consensus estimates by 13%. 

The shortfall was primarily in Model 3/Y deliveries, down by approximately 12%. Tesla’s deliveries would need to grow around 17% for the rest of the year to align with the 2024 consensus. 

Despite anticipating a Model Y refresh later this year, reports suggest potential delays, complicating the volume growth outlook. Additionally, he noted that first-quarter production dropped 2% year-over-year to 433k units, though it exceeded deliveries by 47k units. 

Management attributed the production decline to issues at the Fremont factory and external disruptions, indicating production challenges rather than a lack of demand.

Tesla’s price reductions in the U.S., nearly 20% in 2023 and 9% in 2024 haven’t spurred the expected volume growth, Tyndall said. Major leasing and rental companies are scaling back their Tesla fleets due to uncertainties in used vehicle pricing. 

Consequently, Tesla’s aggressive pricing strategy and the deceleration in delivery growth have led to an 18% cut in our 2024 EBIT forecast, positioning him 11% below the consensus on earnings.

Moreover, the commercialization and delivery timing of Tesla’s pre-revenue ventures, including Dojo, Full Self-Driving (FSD), and Optimus, remain uncertain, he noted. 

These projects contribute significantly to Tesla’s valuation, but the anticipated timelines may extend beyond current market expectations. CEO Musk’s recent remarks underscore the high-risk nature of these ventures, adding to the uncertainty, he said. 

This, coupled with the ongoing dispute over CEO compensation, introduces additional governance concerns and speculation about the company’s future direction if the resolution doesn’t favor Musk, Tyndall stated.

Tesla lost 14% in stock value in the last 12 months. Investors can gain exposure to the stock via Tidal ETF Trust II The Meet Kevin Pricing Power ETF PP, and Vanguard Consumer Discretion ETF VCR.

Price Action: TSLA shares traded higher by 0.79% at $169.74 on the last check Wednesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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