2023 is already on the horizon and set to be a big year for Tesla (TSLA). There is the potential launch of both the Cybertruck and Semi to look forward too, as the entry into new segments could provide a real boon.
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However, it is the large “potential cost benefits” from two different sources which Deutsche Bank’s Emmanuel Rosner believes could have a big impact on gross margins.
“Looking ahead to next year, we now forecast Tesla could lift gross margin by another 300bps YoY, thanks to positive mix shift towards lower COGS-production facilities and benefit from IRA’s battery production credits in the U.S,” Rosner explained.
Starting from a base COGS (cost of goods sold) per vehicle of $36,000 in 2021 (prior to the impact from the increase in the price of raw materials and inflationary costs which via product price hikes), Rosner reckons that by expanding the “manufacturing footprint” to lower COGS “regions and facilities” – namely the new Berlin and Austin plants which are cheaper to operate than the Freemont facility – Tesla could generate an average cost reduction of $2,400/vehicle (or 6.5%). Additionally, US battery production credits in Fremont and Texas could save another ~$800/vehicle when averaged out on a worldwide basis.
Put together, the potential cost reduction of $3,200/vehicle could amount to an improvement of 5.5% of the ASP (average selling price), although keeping a lid on expectations, Rosner “conservatively” only boosts 2023 gross margins by 200bps from 29.5% to 31.5%, suggesting a 300bps improvement from 2022 levels. That results in adjusted EPS rising from $6.60 to $7.15, some way above consensus at $5.82.
What does this all mean for the stock? Rosner raised his 12-month price target on TSLA to $400 (from $375), while reiterating his Buy rating. (To watch Rosner’s track record, click here)
On the other hand, the Street’s average target remains a more subdued $311.97, which suggests the shares have about about 8% upside from current levels. Looking at the consensus breakdown, based on 18 Buys, 6 Holds and 5 Sells, the analysts’ view is that this stock is a Moderate Buy. (See Tesla stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
