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Investors are bracing themselves for Tesla’s quarterly results on Wednesday as the electric vehicle manufacturer struggles with lagging sales. Tesla released its third-quarter vehicle production and delivery numbers earlier in October, which showed a nearly 7% drop in vehicle deliveries from the prior quarter. The number also fell short of Wall Street’s estimates; Tesla reported 435,059 deliveries, while analysts polled by StreetAccount had forecast 461,640 deliveries in the period. And while Tesla has unrolled a series of price cuts across its range of models to bolster demand, that’s also resulted in downbward pressure on profit margins. Tesla’s share of the electric vehicle market has also fallen this year, touching 58% in October 2023, down from 65% a year earlier. Still, Tesla shares have nearly doubled this year, although they’ve recently struggled, falling more than 2% in October, and down more than 18% from the 52-week high reached in July. The Elon Musk-led company will post its third-quarter results Wednesday after the market closes. Analysts are estimating earnings of 73 cents per share on revenue of $24.097 billion, according to LSEG, formerly known as Refinitiv. Tesla has managed to beat earnings and revenue consensus estimates for 16 and 15 of the past 20 quarters, respectively, according to StreetAccount. Wall Street will be closely looking at Tesla’s gross margins to gauge if the trough has passed — or if there’s more downside potential ahead. The company is also expected to release its Cybertruck fleet soon. Ahead of Tesla’s quarterly release, several Wall Street analysts have pulled back their performance forecasts. TSLA YTD mountain Tesla shares in 2023 Deutsche Bank lowers price target Deutsche Bank is among the few large investment firms on Wall Street with a buy rating on Tesla. However, the bank reduced its price target to $285 from $300 late last month, citing “meaningful downside risk” in 2024 due to limited volume growth. “Amid next year’s particularly muted volume growth (just 300k units, or only 17% YoY) but potentially less pricing pressure, we bake in a moderate ~1% price decline y/y, given the higher Model 3 price mix which should start in 4Q23 in China and potentially roll out to the U.S. as well.” Piper Sandler forecasts more delivery slowdowns Piper Sandler also kept its overweight rating on shares, while notching down its price target to $290 from $300 on Oct. 15, attributing it to disappointing third-quarter delivery results. “Cybertruck and other growth initiatives are on the horizon — and there’s a reasonable likelihood that margins will bottom in Q3 — but still, we wouldn’t be surprised if TSLA trades sideways, at best, in the coming months (margins in Q3 could give people pause). Looking into 2024, delivery growth will likely slow before re-accelerating, but this is already reflected in Street estimates.” Wells Fargo cuts target price Wells Fargo trimmed its price target by $5 to $260 on Oct. 9, leaving its investment recommendation at equal weight. The bank says more price cuts are needed in order for Tesla to meet its delivery target in the fourth quarter. “To reach 1.8M deliveries in FY23, TSLA needs ~475K deliveries in Q4, & requires close to full utilization of its global capacity of > 506K. Q3 plant downtime was related to retooling at Austin & Shanghai for Model 3 & Cybertrucks. The Model 3/Y refreshes & possibly the Cybertruck rollout, with reportedly 1.9M preorders, could help demand. However, we doubt either will be enough, and therefore more px cuts, particularly globally, may be needed in Q4 to hit the delivery target.” Goldman Sachs remains neutral on Tesla Goldman Sachs kept its neutral rating on Tesla on Oct. 3, saying that positive long-term growth potential was offset by additional price reductions and the stock’s full valuation. “Key downside risks to our view relate to potentially larger vehicle price reductions than we expect, increased competition in EVs, delays with products/capabilities like [Full self-driving]/the third generation platform/4680, key person risk, the internal control environment, margins, and operational risks associated with Tesla’s high degree of vertical integration.” Guggenheim stays bearish Guggenheim is one of the most bearish Wall Street firms on Tesla. The broker has a sell rating on the stock and a price target of $125 which, if reached, would send Tesla 49% lower. “U.S. inventory trends suggest supply is running ahead of demand. While summer production shutdowns may limit the near-term need for pricing cuts (magnitude of downtime remains unclear), we believe QTD U.S. inventory is a clear sign that at current run rate supply, U.S. demand is trailing production output.” —CNBC’s Michael Bloom contributed to this report.
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