On Tuesday, Tesla Inc. (NASDAQ:TSLA) maintained its Perform rating at Oppenheimer, following the electric vehicle manufacturer's report on first-quarter deliveries. The company's recent delivery numbers fell short of even the most conservative forecasts, leading to concerns about sustainable gross margins (GM) as Tesla aims to increase recurring revenue.
The analyst from Oppenheimer anticipates that the first-quarter gross margin could benefit from a 150-200 basis points support due to deferred revenue recognition associated with Full Self-Driving (FSD) features.
However, this potential boost is expected to be offset by a 100-125 basis points headwind from underutilization. A significant concern is the impact of price reductions as Tesla pushed to increase sales volumes toward the end of the quarter, which could lead to a 400-500 basis points impact from price declines based on the reported volumes.
The build-up of inventory during the quarter, which represents an 11-day supply based on first-quarter deliveries, is seen as a sign of softening demand and a potential drag on ongoing gross margins. While the inventory level is not particularly high, it is anticipated to be viewed negatively by investors and expected to be absorbed in the second quarter of 2024.
Looking ahead, the firm suggests that optimistic investors may point to the price increases and model transitions in the second quarter as indicators that the first quarter marked the lowest point for deliveries and gross margins.
Despite these differing perspectives, Oppenheimer remains neutral on Tesla's stock, anticipating that it will show weakness leading up to the company's earnings announcement on April 23.
InvestingPro Insights
As Tesla (NASDAQ:TSLA) navigates through its recent challenges highlighted by Oppenheimer, InvestingPro provides additional context with key financial metrics and insights. Tesla's market capitalization stands at a robust $528.71 billion, reflecting its significant position in the market. The company's P/E ratio is currently high at 36.77, indicating a premium valuation that investors are willing to pay for its earnings potential. Despite concerns over the recent delivery numbers, Tesla holds a strong revenue growth rate of 18.8% over the last twelve months as of Q1 2023, showcasing its ability to expand its sales in a competitive environment.
Two relevant InvestingPro Tips for Tesla include the fact that the company holds more cash than debt on its balance sheet, which provides financial flexibility and resilience. Additionally, Tesla's liquid assets exceed short-term obligations, indicating a healthy liquidity position. These factors may reassure investors about Tesla's ability to manage its finances amidst the current headwinds.
For those looking to delve deeper into Tesla's financial health and performance, InvestingPro offers a comprehensive set of 22 additional tips. Interested readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, enhancing their investment research with valuable insights from InvestingPro.
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