For investors hoping Tesla (NASDAQ:TSLA) will put in a strong performance in Q3, get ready to be disappointed.
At least that is Deutsche Bank analyst Emmanuel Rosner’s take. As part of Deutsche Bank’s IAA Cars Conference, Rosner held investor meetings with the EV leader, and does not have a reassuring outlook, at least for the short-term.
“In the very near term, we came away with the sense there could be downside risk to investors’ expectations for volume and margin in Q3, reflecting planned summer production shutdowns which will push both production and deliveries down QoQ, discounts on inventories, and limited positive costs offsets in the quarter,” Rosner explained.
In Q3, Tesla has witnessed a decrease in volume, while most of the cost savings from raw materials already took place in Q2, although there has still been a “moderate benefit” in Q3. The most significant opportunity for cost reduction, therefore, would come from the ongoing expansion of operations in Berlin and Texas. However, in both Berlin and Texas, the weekly production volume was intentionally reduced from 5,000 units per week to enhance cost control and capacity scaling, which limited the sequential “ramp-up benefits.”
It’s not all doom and gloom, however. Looking ahead, Tesla indicated that its updated Model 3 could experience “solid demand.” With a probable reduction in production costs and a higher selling price compared to the previous model, it could contribute to improved profitability. The company also expressed excitement about the upcoming release of the Cybertruck, which is set to begin production and deliveries in the fourth quarter, and the “potential halo effect” it could have on the demand for its other vehicles. Most importantly, Tesla reaffirmed that its top priority and its biggest opportunity for growth comes from its next-generation vehicle platform, which could be responsible for over 5 million of annual global production. This is followed by the focus on Full Self-Driving (FSD) technology, AI, and Dojo.
“All in,” Rosner summed up, “we continue to see some risk to 2023/24 Street expectations as Tesla adjusts pricing to secure its volume growth in a challenging macro, but remain bullish on Tesla’s longer-term opportunities.”
Accordingly, Rosner reiterated a Buy rating on Tesla stock alongside a $300 price target. The figure suggests shares could rise by 21% from current levels. (To watch Rosner’s track record, click here)
Overall, 10 other analysts join Rosner in Tesla’s bull camp but with an additional 13 Holds and 5 Sells, the stock receives a Hold consensus rating. At $266.73, the average target implies shares will deliver ~7% in the year ahead. (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.
