Tesla Peak Earnings In 'Rear View' As EV Maker Falters In China, Says Analyst: 'Wall Street Remains ... Criminally Bullish'

Tesla, Inc. TSLA is apparently facing a demand problem amid economic uncertainties and intense competition. A Tesla bear sees more trouble ahead for the electric vehicle maker.

What Happened: Two very negative China-centric data points will emerge over the next few days, said GLJ Research analyst Gordon Johnson.

• A collapse in China sales, starting in May
• April Shanghai factory data will likely show Tesla produced 9,000 more cars than it sold for the month.

This, according to the analyst, will increase fears that Tesla has a demand problem in its largest and only profitable market in China.

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Direct Sales Model Hurts?  The direct sales model used by the likes of Tesla and most other U.S. EV makers will likely prove a massive headwind to margins if the global auto industry enters a recession, Johnson said.

The legacy automakers have dealer franchises and when the going gets tough, they can still recognize the inventories sitting on lots as revenue, the analyst said. This will be reflected in reported margins and appear in the balance sheets of dealers and not the manufacturers.

But for most EV manufacturers, when they produce more cars than they sell, not only does it show up in lower sales, but it also shows up in depressed gross margin, the analyst said.’

Earnings Peaked? Johnson said peak earnings for Tesla may be in the rear-view mirror, as new entrants and all major OEMs unleash new EVs at various price points, better interiors, similar or faster charging speeds and much better quality.

Tesla opening up its U.S. charging network to everyone eliminates the last reason to buy its "now trailing-edge" EVs, he said.

"It is our opinion that Wall Street remains surreptitiously criminally bullish," the analyst said. He noted that Wall Street's 2023 earnings per share estimate for Tesla has fallen from $6 to $3.23 over the past seven months. The metric is likely to get worse in 2024, he said.

Tesla closed Tuesday's session down 1.54% at $169.15, according to Benzinga Pro data.

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