On Monday, Deutsche Bank (ETR:DBKGn) adjusted its outlook on Tesla (NASDAQ:TSLA) shares, lowering the price target to $218 from the previous $250 while maintaining a Buy rating on the electric vehicle manufacturer's stock.
The adjustment comes as the bank forecasts Tesla's first-quarter 2024 deliveries and earnings to fall short of current market expectations by a significant margin. The analyst cited several reasons for the downward revision, including limited volume growth and profitability challenges stemming from recent price reductions.
The bank has revised its estimate for Tesla's first-quarter deliveries to 427,000 units, a decrease from the prior estimate of 476,000 units. This revision is attributed to lower production of the Model 3 in the United States following the Highland refresh, a slower than expected increase in Cybertruck production, and a global softening in electric vehicle demand.
Furthermore, the full-year delivery forecast has been reduced to approximately 1.96 million units, down from the consensus estimate of around 2.1 million units, which indicates a growth rate in the high single digits compared to the previous mid-teens growth expectation.
The bank also anticipates pressure on Tesla's margins and earnings, noting that the company has implemented significant price cuts in China and Europe earlier in the quarter, followed by additional moderate price adjustments in February to encourage vehicle purchases.
The slower ramp-up of the Model 3 in the U.S., an earlier factory shutdown, and a recent arson attack at the Berlin facility are expected to hinder factory efficiency gains. With the introduction of the new labor costs and the margin-dilutive Cybertruck beginning production at the start of 2024, the bank predicts that Tesla's first-quarter margin will experience a deeper quarter-over-quarter decline, with limited opportunities for improvement throughout the year.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.