Source: Wall Street News
Tesla's delivery volume for the first quarter is about to be announced, and analysts have begun to lower delivery expectations one after another. Weak demand in the Chinese market will make the first quarter a “nightmare.”
Market pair$Tesla (TSLA.US)$Enthusiasm is gradually cooling down, and demand in the Chinese market is weakening, making Wall Street worried about its delivery volume in the first quarter.
According to FactSet data, Tesla delivered 457,000 vehicles in the first quarter. In contrast, 423,000 vehicles were delivered in the first quarter of 2023 and 484,000 units were delivered in the fourth quarter of 2023. At the end of January, the market expected 494,000 vehicles to be delivered in the first quarter.
On March 28, Wedbush analyst Dan Ives, who has been optimistic about Tesla for a long time, believes that Tesla is currently in a “tense period” and that deliveries for the first quarter will be announced in the next few days, and this quarter may become a nightmare for Tesla due to weak demand in the Chinese market, lowering the target price from $315 to $300:
Although Tesla still has a leading edge in the electric vehicle market, a series of recent demand issues have drastically lowered its delivery expectations for the first quarter. Although accidents such as the Berlin factory fire affected supply, it is undeniable that the bigger problem is weak demand in the Chinese market.
Dan Ives expects Tesla's delivery data to be released next Tuesday, and deliveries in China will drop by 3%-4% this quarter compared to the same period last year. “This will not be a time for many to celebrate, but a quarter for Tesla investors to heal.”
Meanwhile, Deutsche Bank analyst Emmanuel Rosner also lowered delivery expectations for Tesla due to similar concerns, lowering delivery expectations for the first quarter from 427,000 vehicles to 414,000 vehicles. Rosner believes that although Tesla's price reduction strategy in the Chinese and European markets may boost sales in the short term, it will continue to put pressure on profit margins and earnings in the long run:
Although Tesla has announced that it will raise prices in the US and China starting in April, we think it is to boost sales in March rather than a sign of strong demand. We lowered our delivery forecast for the full year of 2024 to about 1.9 million vehicles, which is lower than the general forecast of about 2.06 million vehicles.
Morgan Stanley lowered the forecast value of Tesla Q1 deliveries from 469,400 units to 425,000 units, and the annual delivery forecast was reduced from 199,800 units to 1.954 million units.
Citi also lowered its first-quarter delivery forecast for Tesla in its latest report, from 473,000 vehicles previously to 429,000 units, an increase of only 2% over the previous year. Among them, the US and Chinese markets are expected to deliver 160,000 and 132,000 vehicles each, while the European market is expected to deliver 92,000 vehicles.
Citi analyst Itay Michaeli pointed out that the market's deliveries to Tesla in the first quarter are still high. Currently, buyers expect Tesla to deliver far lower than the seller's estimate of 460,000 to 470,000 vehicles. The situation is still challenging for Tesla's stock price, and predictions for next year are too high.
Throughout March, several investment banks have lowered Tesla's target price, including Morgan Stanley, Deutsche Bank, Wells Fargo, UBS, and Goldman Sachs. Among them, Wells Fargo's target price is as low as $120, which means it will drop another 30%.
Wells Fargo analysts believe that the core problem facing Tesla is that its once strong growth capacity is no longer there. Many price cuts to stimulate demand have had little effect. Revenue and profit growth have clearly slowed, but the valuation is still significantly higher than that of other large growth stocks.
Dan Ives said that market expectations related to Tesla are extremely negative, and it makes sense to sound the alarm for Musk and Tesla this time, because growth has been slow and profit margins are being squeezed:
For Musk, this is a critical moment. For Tesla to get through this turbulent period, it may usher in darker days. How to get through this period will determine Tesla's future.
Dan Ives said he is still optimistic about Tesla's FSD technology, which is a key pillar of disruptive technology, but investors' patience is running out, and Musk often talks about developing AI outside of Tesla.
Therefore, in order to reverse the current situation, Dan Ives suggested that Musk needs to set a clear target range for profit margins and delivery volume in 2024, address the weak demand in the Chinese market head-on, and hold a battery/artificial intelligence technology day to fully explain the company's technology roadmap to investors.
Overnight in US stocks, Tesla fell more than 2%. This month, it is still falling more than 12%, and the year-to-date decline has been falling by more than 29%. Over the past 12 months, the decline has reached 9%, and the S&P 500 index has risen more than 30% during the same period.
editor/tolk