On Wednesday, an HSBC analyst adjusted the price target for Tesla (NASDAQ:TSLA) shares, bringing it down to $138 from the previous $143, while maintaining a "Reduce" rating.
The analyst cited concerns over the uncertain timing and commercialization of Tesla's various projects, such as Dojo, Full Self-Driving (FSD), and Optimus. These projects are considered significant to the company's valuation, but the analyst believes they face a longer timeline than what is currently reflected in Tesla's stock price.
The analyst's remarks followed Tesla's first-quarter delivery report, which showed a 9% year-over-year decrease and a 20% drop from the previous quarter, totaling 387,000 vehicles. This figure was 13% below the consensus compiled by the company. The shortfall was primarily due to a 12% decrease in Model 3 and Model Y deliveries. According to the analyst, Tesla would need to increase deliveries by approximately 17% for the rest of the year to meet the current consensus for 2024.
The report also noted that while a potential refresh of the Model Y expected later in the year could boost sales, conflicting media reports have raised concerns that the update may be delayed. Production in the first quarter was reported at 433,000 units, a 2% decrease year-over-year, but still 47,000 units ahead of deliveries.
Tesla management has attributed production issues to the updated Model 3 at the Fremont factory, as well as factory shutdowns due to shipping diversions from the Red Sea (NYSE:SE) conflict and an arson attack at the Gigafactory Berlin.
In addition to production and delivery challenges, the analyst highlighted governance concerns stemming from a dispute over CEO Elon Musk's pay. The outcome of this dispute, according to the analyst, adds another layer of uncertainty regarding Tesla's future. Musk's own characterization of the Dojo project as a "long shot" with a "low probability of success" during the fourth-quarter earnings call of 2023 was also mentioned as reinforcing the analyst's cautious stance on the company's prospects.
InvestingPro Insights
As Tesla faces scrutiny from analysts and investors alike, real-time data from InvestingPro provides a more detailed look at the company's financial health and market performance. Tesla holds a substantial market capitalization of $530.68 billion, indicating its significant presence in the market despite recent challenges. The company's P/E ratio stands at 35.06, suggesting a high valuation relative to earnings, which is echoed by a P/E ratio of 35.38 for the last twelve months as of Q4 2023. Furthermore, Tesla's revenue growth for the same period was 18.8%, showcasing the company's ability to increase sales amidst a competitive landscape.
Among the several InvestingPro Tips, two are particularly relevant in light of the article's context. Firstly, Tesla is recognized as a prominent player in the Automobiles industry, which may help it navigate through the production and delivery challenges mentioned. Secondly, the company's stock price movements have been quite volatile, as evidenced by a 17.77% drop over the last month, aligning with the concerns raised by the HSBC analyst regarding the commercialization of Tesla's projects.
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