Deutsche Bank reiterated a Buy rating on Tesla (NASDAQ:TSLA) but trimmed their 12-month price target on the electric vehicle stock to $260.00 (From $275.00) ahead of the company’s 4Q earnings and delivery reports.
Analysts at Deutsche Bank are expecting Tesla to report 4Q23 delivery results near their 476k unit estimate. If achieved, the automaker will have reached 1.8m units for the year as it guided.
However, analysts are still preparing for material downside risk to 2024 consensus due to limited volume growth next year.
Tesla openly acknowledged that it currently finds itself in a transitional phase marked by slower growth. This phase follows a healthy expansion experience with the Model 3 and Model Y vehicles over the last five years. However, these models are nearing their maximum production capacity, marking an intermediate stage before the introduction of Tesla's next-generation platform. This upcoming platform is anticipated to propel the company into its next phase of substantial growth.
“Although 4Q deliveries should meet expectations, we see some risk to earnings.” Wrote analysts in a note.
According to analysts, the current model expects 4Q revenue to be around $24.7 billion, a slight decrease from the initial estimate of $24.9 billion, and below the Street estimate of $25.5 billion. This adjustment is attributed to reduced expectations for ASP.
Additionally, the expected auto gross margin for the quarter is 16.2%, down by 10 bps compared to the previous quarter. Deutsche Bank attributes this decline to price cuts on Model 3 and Y vehicles in the U.S., along with discounts and incentives on inventory. However, there were some price increases in China that partially balanced this out.
Deutsche Bank cut 4Q EPS estimates to $0.69 (From $0.74), below the current Street estimate of $0.74.
TSLA is expected to release 4Q earnings results in late January.
Shares of TSLA are up 3.29% in mid-day trading on Thursday.