Tesla’s (NASDAQ:TSLA) earnings are under pressure as the company is sacrificing margins to boost volumes amid softening demand for electric vehicles (EVs). Notably, its adjusted EPS dropped about 23% to $3.12 in 2023. Further, analysts’ 2024 consensus estimate stands at $3.07, indicating that its EPS will likely decline by about 1.6% in 2024.
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Echoing similar sentiments, Goldman Sachs analyst Mark Delaney reduced his earnings estimate for 2024/2025/2026. Citing near-term pressure on EPS, the analyst cut the price target from $220 to $190 and maintained a Hold rating on March 18.
Notably, Tesla is benefitting from its efforts to lower per-unit costs. Further, its focus on growing output and lower raw material and logistics costs cushion its margins. However, a reduced average selling price of vehicles and increased operating expenses remain a drag. It’s worth highlighting that Tesla’s operating margin decreased by 779 basis points, 493 basis points, 964 basis points, and 784 basis points in Q1, Q2, Q3, and Q4 of 2023, respectively.
Is Tesla a Buy, Sell, or Hold?
Tesla stock is down about 30% year-to-date, reflecting moderating demand, increased competition, and pressure on margins. Given these short-term headwinds, Wall Street remains sidelined.
TSLA stock has 10 Buy, 18 Hold, and six Sell recommendations for a Hold consensus rating. Analysts’ average price target on TSLA stock is $207.74, implying an upside potential of 19.53%.
