By The stock of Tesla (NASDAQ: TSLA) is expected to experience a difficult Thursday as the company reported fourth-quarter earnings that fell short of expectations. Adding to the concern is the vague volume guidance for 2024 provided by Tesla.
Following the release of the Q4 report, Wall Street analysts have voiced their disappointment. Several analysts have even lowered their price targets for Tesla stock in response to the earnings report.
In its report on Wednesday evening, Tesla announced earnings per share of 71 cents, while analysts were anticipating 73 cents. Additionally, Tesla management mentioned that automotive sales growth in 2024 would be significantly lower than that of 2023.
Unfortunately, they did not provide any further details. It is worth noting that vehicle sales increased by nearly 40% year over year in 2023, reaching 1.8 million units. For 2024, Wall Street expects sales to range between 2.1 million and 2.2 million units, representing a growth rate of approximately 20%. Although this growth is lower than that of 2023, analysts would have been more comfortable if Tesla had provided a specific figure.
“We were completely wrong in our expectation that Musk and his team would provide a comprehensive strategic and financial overview of the ongoing price cuts, margin structure, and fluctuating demand during the call,” commented Wedbush analyst Dan Ives in a report published on Thursday. “Instead, we were presented with a vague long-term outlook for Tesla, leading to another disappointing conference call.”
This “disappointing” conference call resulted in Tesla stock dropping nearly 8% in premarket trading. In contrast, S&P 500 and Nasdaq Composite futures remained relatively stable.
Despite this downturn, Ives still maintains a Buy rating on Tesla shares; however, he has revised his price target to $315 from $350 per share. RBC analyst Tom Narayan also rates the shares as Buy, but he slightly adjusted his target price from $300 to $297 per share following the Tesla earnings call.
Tesla Faces Challenges in Gross Margins and Price Targets
Tesla’s delivery estimates remain unchanged, despite a vague guide, according to a recent report. However, the report does lower expectations for the car gross margin due to a less robust cost-down opportunity. The report also highlights that Tesla’s next-generation vehicle platform, which includes a lower-priced Tesla EV, is still several quarters away from impacting numbers.
Wells Fargo analyst Colin Langan suggested that the recent price cut will likely result in falling margins by 2024. Tesla’s automotive gross profit margins, excluding regulatory credit sales, showed an increase from 16.3% in Q3 2023 to 17.1% in Q4. Analysts had originally predicted margins of approximately 18% for 2024, but these estimates are now at risk.
Langan rates Tesla shares as Hold and has adjusted his target price from $223 per share to $200 per share.
Following the conference call, several Wall Street analysts have lowered their price targets for Tesla stock. Bernstein analyst Toni Sacconaghi maintains his Sell rating, but has not adjusted his $150 price target. Sacconaghi believes that 2024 will be a challenging year and that it is increasingly apparent that 2025 will not fare any better.
Tesla management seems to share similar concerns regarding 2024. However, Tesla bulls remain hopeful that Sacconaghi’s predictions about 2025 will be proven wrong.
In the wake of these adjustments, the average analyst target price for Tesla stock has fallen to about $226, which is approximately $12 lower than the pre-conference call level.
As of Thursday, Tesla stock had experienced a year-to-date decline of approximately 16%. This decline can be attributed to the impact of more price cuts and weakening demand for electric vehicles, both of which have dampened investor sentiment.
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