Tesla Sized Up By 9 Analysts After Q3 Earnings: 'Mini Disaster' Conference Call, First Bad Miss In Some Time, A Win For The Bears

Electric vehicle leader Tesla Inc TSLA reported third quarter financial results after market close Wednesday.

The company reported revenue and earnings per share that both missed estimates from analysts for the quarter.

Here’s a look at what analysts are saying after the recent earnings report.

The Tesla Analysts: Evercore analyst Chris McNally had an In-Line rating and a price target of $180.

Roth MKM analyst Craig Irwin had a Neutral rating and a price target of $85.

Morgan Stanley analyst Adam Jonas had an Outperform rating and lowered the price target from $400 to $380.

Guggenheim analyst Ronald Jewsikow had a Sell rating and a price target of $125.

Oppenheimer analyst Colin Rusch had a Perform rating and no price target.

Needham analyst Chris Pierce had a Hold rating and no price target.

Wedbush analyst Daniel Ives had an Outperform rating and lowered the price target from $350 to $310.

GLJ Research analyst Gordon Johnson had a Sell rating and a price target of $24.33.

Bank of America analyst John Murphy had a Neutral rating and a price target of $290.

Evercore on Tesla: The electric vehicle company reported its first bad miss in some time according to McNally.

“Tesla headline miss was BAD,” McNally said.

The analyst said the conference call was also problematic for the company and gross margins came in significantly lower than expected.

“We currently are most concerned about ’24-26 EPS which likely is 15%+ too high on the combo of lower units and additional price cuts resulting in further GM (gross margin) pressure.”

Roth on Tesla: The trajectory for Tesla weakened and the company should not be viewed as a software company, Irwin said.

“The crucial debate will be how much does Tesla need to cut prices to keep deliveries moving at an attractive rate in 2024,” Irwin said. “We see the 2.25 million 2024 deliveries consensus as unachievable in nearly every scenario.”

The analyst said expectations for the company might be too high and the threat of competition is not priced in.

“We believe the Neutral rating appropriately balances how Tesla is positioned to continue executing, but the shares are valued at an oversized premium to all peers in the automotive sector, in our views.”

Morgan Stanley on Tesla: Investor expectations for the Cybertruck were tempered during the conference call, Jonas noted.

“How can we be Overweight Tesla despite the company’s caution on macro, consumer, Cybertruck and Mexico? Can a ‘growth stock’ work if earnings don’t’ grow in 2024,” Jonas asks.

The analyst said the key is where the $5 billion in annual research and development spending is going.

Jonas said the rating came from Tesla being “much more than an auto company.” The analyst noted $86 of the price target is related to the core auto business with the rest covering items such as Network Services, Mobility, Licensing, Energy and Insurance.

“We receive significant pushback from our clients for including non-auto revenue streams in our valuation. Our Overweight thesis is highly dependent upon these business lines.”

Jonas also said the tone from the company and CEO Elon Musk was one of the “most caution Tesla conference calls” heard in years.

“Tesla conveyed a message of caution around growing too fast into an increasingly uncertain/higher interest rate environment.”

Jonas also noted the operating margin for Tesla without credits was 5.3% in the third quarter, which was below an estimate of 7.6% for General Motors Company GM and close to the estimate for Ford Motor Company F of 5.3%.

Related Link: Elon Musk Highlights Concerns About Economy, Interest Rates 

Guggenheim on Tesla: The product cycle Tesla is stuck in could lead to more price cuts in 2023, according to Jewsikow.

“TSLA reported 3Q results that largely supported our bear thesis, with gross margin downside and a conference call that we believe failed to reinforce core bull thesis tenets (FSD, Cybertruck, gross margins),” Jewsikow said.

The analyst said Tesla was also cautious while discussing the Cybertruck launch with Musk saying it would take time for the ramp-up and profitability of the highly anticipated vehicle launch.

“We continue to believe the direction for pricing and margins is lower and TSLA is in a bit of an air-pocket in their long-term product innovation cycle.”

Oppenheimer on Tesla: The third quarter results from Tesla were disappointing for Rusch.

The analyst is encouraged by investments the company is making but said they could take years to pay off.

“With AI contributing significantly to TSLA market cap, we believe how/when TSLA monetizes these investments remains a key valuation consideration,” Rusch said.

The analyst lowered earnings per share estimates for the current fiscal year and the next two fiscal years. The move comes from Tesla’s comments on production ramp and margin impact from the Cybertruck.

Needham on Tesla: Commentary from Tesla and Musk was less bullish than normal, Pierce said.

“On the whole we view the quarter as a win for the bears,” Pierce said.

The analyst noted bears likely won due to consensus estimates being lowered for the future, Cyberrtruck expectations lowered, comments on the macro environment and a lack of updates on FSD and Robotaxi.

“Bulls can argue a bottom is in, and we agree, but bottoming at a lower absolute level vs. expectations is likely to increase pressure on consensus EPS estimates.”

One key item moving forward for the analyst is pricing with the potential that Tesla could put pressure on rivals to lower prices, which could impact their profitability.

“TSLA’s valuation premium was easier to justify when looking at its margins on an absolute level vs peers. TSLA’s margin path from here is far less certain.”

Wedbush on Tesla: The conference call by Tesla was a “mini disaster” according to Ives.

“We have seen the highest highs and some very challenging times from Tesla and Musk over the last decade with last night’s quarter and conference call not an inspiring one for the bulls,” Ives said.

Ives said the tone from Musk was cautious on the conference call.

“Tesla left open the door for more price cuts ahead as Musk discussed a challenging macro environment with high-interest rates that has clearly created a Rubik’s Cube backdrop for Tesla to navigate with consumers.”

Ives said there are challenges for Tesla in the near term to fight off alongside the longer-term EV demand story.

“We remain bullish on Tesla for the next 12 to 18 months but clearly see hurdles ahead that will be an albatross for the Street to get their arms around.”

GLJ Research on Tesla: Automotive gross margins below estimates were the key for noted Tesla bear Johnson.

“Was TSLA’s 2020-22 profit edge, vs. the broader auto industry, structural, or simply a temporary timing difference resulting from the other automakers lacking the parts to make their cars, which is now decidedly over?” Johnson asked.

The analyst said Tesla “obliterated” its bull thesis with commentary on items like the Cybertruck, Model 3 Highland, growth rates and the price of vehicles were cautious by Musk.

“What we’ve learned recently is TSLA’s margins and fundamentals are in a state of structural decline.”

Bank of America on Tesla: Near-term risks could be a major focus for analyzing Tesla, Murphy said.

“We reiterate our Neutral rating on Tesla, balancing near-term risks from the broader macro, increasing competition, and the impact of recent price cuts against its efforts to reduce costs, meaningfully grow, and unique ability to remain agile,” Murphy said.

The analyst said the outlook for Tesla is focused on longer-term targets.

TSLA Price Action: Tesla shares are down 8.62% to $221.77 on Thursday versus a 52-week trading range of $101.81 to $299.29.

Read Next: Trading Strategies For Tesla Stock After Q3 Earnings 

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