Analysts slash estimates, stock targets on Tesla stock after price cuts

Analysts slash estimates, stock targets on Tesla stock after price cuts
© Reuters. Analysts slash estimates, stock targets on Tesla (TSLA) stock after price cuts

By Staff

Tesla (NASDAQ:TSLA) is again the center of analyst attention with several brokers offering their thoughts on the electric vehicle (EV) giant and the recently-announced price cuts. For some analysts, these actions point that Tesla is experiencing weakening demand.

Jefferies lowers Tesla stock target

Jefferies analysts, long-time Tesla bulls, reiterated a Buy rating on the electric vehicle (EV) maker but lowered the price target by nearly 50% to $180 per share after cutting 2023 revenue and EPS estimates.

The analysts see Tesla delivering 1.7 million EV units in 2023 while slashing core auto margins to approximately 24%. Revenue estimates for 2023 are slashed by 21% to $99.4 billion with GAAP EPS down to $3.61, which is 17% below consensus.

“Our conviction that Tesla leads the industry towards a better business model is intact although trajectory bumpier than we would like. Rebasing earnings is painful but the pricing offensive takes the investment case back to the core mission of leading in affordability and the efficient use of resources,” they said in a client note.

The analysts also weighed in positively on the appointment of insider Tom Zhu as the No.2 person in the company behind CEO Elon Musk.

Bernstein sees a huge demand problem

Similarly, Bernstein analysts slashed FY23 EPS estimates to $3.80 from the prior $4.96 and significantly below the $4.99 consensus. The analysts argue that the recently announced price cuts point that Tesla has a demand problem and have a “huge impact on TSLA’s economics.”

“Notably, price reductions in China do not appear to have created a significant surge in demand. Our sensitivity analysis points to FY 23 EPS anywhere in the $3.20 – $4.50 range,” they said in a note.

The analysts also argue that Tesla’s key challenge is to offer more, lower-cost EV models.

“We don’t expect a new, low cost offering to ship in volume til 2025, by which time Tesla will face even more EV competition,” they added.

All-in-all, the analysts remain “torn” on Tesla stock. They rate the EV giant at Underperform despite their price target of $150 per share implying a 23% upside from current levels.

“On one hand, the stock is now trading at close to our 2050 DCF (~$120/share), investor sentiment is poor and if consensus numbers get appropriately reset, there could be limited downside risk to estimates. That said, it is unclear if consensus numbers will get reset sufficiently and whether Tesla could still struggle with demand issues over the course of the year. Recent demand challenges also raise questions on whether long term forecasts for Tesla’s market share and margins may be too high,” they concluded.

Goldman cuts EPS estimates on reduced ASPs

Goldman Sachs analysts also moved to slash FY23 EPS estimates, citing reduced average selling prices (ASPs). While they were expecting Tesla to cut prices, they were surprised by the magnitude of these cuts.

FY23 EPS is now seen at $3.50 (from the prior $4.00) including SBC (stock-based compensation). Excluding SBC, the analysts see FY23 EPS at $3.95. As a result, the price target goes to $200 per share, down from $205.

“Although the reduced prices for Tesla vehicles will likely result in lower earnings, we expect this to help drive stronger volumes all else equal. We see this as important for Tesla’s vertically integrated model, especially as its new factories likely offer attractive unit economics at scale,” the analysts said in a client note.

Tesla stock is up about half a percent in pre-open Tuesday after closing at $122.40 on Friday.