Barclays reiterated an Overweight rating on Tesla (NASDAQ:TSLA) with a 12-month price target of $220.00 as analysts believe that the electric vehicle maker is set up well for growth. However, they are concerned about the company’s model concentration. While Tesla is currently the 16th-largest automaker by volume (in 2022), the automaker relies heavily on its bestselling model, the Model Y, which was the largest-selling model by volume globally in 1Q23. While other OEMs have achieved volume across a wide set of models/trims, Tesla has achieved volume with a very narrow set of models and trims.
The analysts wrote in a note, “We appreciate that Tesla has embodied the global auto push to simplification and complexity reduction. Yet with Tesla increasingly facing demand constraints, and with price cuts/discounts required to clear more volume, it begs the question whether Tesla is running into an issue with excess model concentration.”
During the 2023 Tesla shareholder’s meeting, CEO Elon Musk noted that Tesla is actively working on the development of two new models that have the potential to collectively achieve a minimum volume of 5 million units per year. One of these models, widely anticipated as the "Model 2," is expected to be a cost-effective, mass-market vehicle offering from Tesla. Barclays analysts, alongside most investors, presume the Model 2 will be designed for exceptionally high volumes.
Tesla sold just over 1.3mn units in 2022 (representing a 1.7% share of global auto sales), Barclays assumes that by 2030 Tesla will reach 6.2mn units of volume with an implied ~7% global market share —far below its target of 20mn units, but nevertheless still enough to put it near the top 5 of global automakers by volume.
The analysts continue to see a risk of negative EPS revisions for 2024 and forecast a 2024 EPS of around $4.00, compared to the consensus estimate of $4.80.
Shares of TSLA are up 4.03% in premarket trading on Tuesday.