The signs looked ominous considering the disappointing Q3 vehicle sales announced by Tesla (NASDAQ:TSLA) earlier this month, and investors were duly handed a dud of a report when the EV leader released its Q3 financial statement after the close on Wednesday.
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Tesla missed on both the top-and bottom-line, delivering revenue of $23.35 billion, amounting to an 8.9% year-over-year increase, yet falling shy of expectations by $790 million. Adj. EPS reached $0.66, missing the consensus estimate by $0.07.
Those headline figures were lackluster and were joined by another metric of interest that also disappointed. Auto gross margins (GM ex credits) came in at 16.3%, below the Street’s 17.6% forecast.
Wedbush’s Daniel Ives, a 5-star analyst rated in the top 2% of the Street’s stock pros, thinks that over the coming quarters margins “should stabilize,” although he also notes that going by the earnings call, Tesla is not “committing to the end of price cuts and that is a big problem and overhang for the stock in the near-term.”
In fact, Ives thinks the earnings call was a bit of a fiasco. “In a nutshell we would characterize last night’s conference call as a ‘mini disaster’ as the Street wanted to get their arms around the falling margins and constant price cuts seen globally, but instead we heard from a much more cautious Elon Musk which focused on higher interest rates, FSD/AI investments, and highlighting the difficult path for Cybertruck production over the next 12 to 18 months,” the 5-star analyst said.
Production on the Cybertruck has kicked off and deliveries out of the Austin factory will start on November 30th. But not mincing his words, Musk said its production will be “extremely difficult.” Tesla’s future goal is to produce 250,000 Cybertrucks per year and there are currently 1 million reservations. However, per Musk, for at least another 12 to 18 months Cybertrucks will be a “negative cash flow and margin process.”
Summing up, Ives said he remains “bullish on Tesla for the next 12 to 18 months but clearly see hurdles ahead that will be an albatross for the Street to get their arms around.”
Accordingly, Ives reiterated an Outperform (i.e., Buy) rating although “reflecting a more cautionary near-term dynamic,” he lowered his price target from $350 to $310, suggesting shares will gain 41% in the year ahead. (To watch Ives’ track record, click here)
On the Street, 12 other analysts join Ives in the bull camp and with the addition of 14 Holds and 4 Sells, the stock claims a Moderate Buy consensus rating. The average target currently stands at $254.74, implying the next 12 months will yield returns of ~16%. (See Tesla stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
