Tesla Inc. (NASDAQ:TSLA) has reported a surge in sales volumes following a series of price cuts on its models this year, resulting in record deliveries of 466,140 units in the second quarter of 2023. However, the price reductions have also led to a decrease in margins, according to Goldman Sachs analyst Mark Delaney on Monday.
Despite the increased sales volumes, Delaney expects Tesla to sell fewer vehicles than previously anticipated in Q3 2023. He lowered his Q3 volume forecast to 460,000 units due to what he believes is "lower S/X demand and the impact of the changeover for the Model 3 Highland." However, he anticipates a rebound to 494,000 units in Q4, boosted by the Highland launch and better S/X volumes following the significant price cuts. This adjustment brings Delaney's 2023 delivery outlook for Tesla to 1.842 million.
The analyst also reduced his 2023 and 2024 earnings per share (EPS) estimates for Tesla to $2.90 and $4.15, respectively, from the previous $3.00 and $4.25. The revision was due to expected lower average selling prices (ASPs) and the impact of lower prices on the auto gross margin.
"We are Neutral rated on the stock," Delaney stated, adding that near- to intermediate-term margin headwinds are offset by a positive view of Tesla's leadership position in the industry and long-term growth potential.
The same sentiment is echoed by other analysts on Wall Street. Based on a mix of 12 Holds, 11 Buys, and 5 Sells, the stock receives a Hold consensus rating. The average target price stands at $270.8, suggesting that shares will remain rangebound for the foreseeable future.
Tesla shares were marked 0.2% lower in pre-market trading on Monday, indicating an opening bell price of $273.83 each. Despite the lowered profit forecasts due to narrowing margins and lower selling prices, Delaney held to his 'neutral' rating on Tesla, as well as his $275 price target.
Tesla earned 91 cents per share over the three months ended in June, a 20% increase from the same period last year, even as revenue surged 47% to a record $24.5 billion. The gap in earnings was largely explained by a sharp reduction in adjusted automotive margins, which were pegged at 18.7%, down from the year-earlier tally of 22.4% following a series of price cuts in its biggest global markets.
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