By Michael Elkins
RBC Capital reiterated an Outperform rating on Tesla (NASDAQ:TSLA) and cut the price target to $225.00 (From $325.00) as the stock continues to feel pressure from concerned investors. Bears are concerned about how demand, pricing, auto-GMs, and Elon Musk’s Twitter distraction are impacting the TSLA brand.
RBC analysts wrote in a note, “Investors are concerned about demand, pricing, auto-GMs, and Twitter distraction/overhang/impact on TSLA brand. These are valid concerns, and a necessary re-calibration of expectations could weigh on the stock near-term. But we see the narrative of TSLA as the best-positioned EV maker and meaningful FCF generation re-emerging in 2023.”
The analysts believe that the stock will remain under pressure as gross margin expectations re-calibrate, but once this occurs, they see a compelling case for TSLA to still drive earnings/FCF higher as the low-cost leader and leveraging opex.
They further added, “Auto gross margins ex-credits has been THE go-to metric for TSLA. We believe this needs to, and will, change.”
Tesla is expected to report quarterly deliveries within 2-3 days of quarter end. Based on checks, regionally reported data, and app download data, RBC Capital forecasts total 4Q22 deliveries of 408.5K units, compared to current Visible Alpha consensus of 432.5K.
RBC’s 2023/24/25 total revenue estimates go to $103B/$120B/$140B from $109B/$127B/$149B, while EPS estimates go to $4.70/$5.25/$6.25 from $5.45/$6.15/$7.05.
Shares of TSLA are down 1.29% in pre-market trading on Thursday.