Wade Bush analyst Dan Ives (DaniVes) said on Thursday that Tesla (TSLA.O) is facing a “tense period” because Tesla's demand in China is still weak, which is expected to drag down the first quarter deliveries to be announced in the next few days.

As Tesla experienced a “nightmarish” quarter, general market expectations dropped sharply.

Also on Thursday, Deutsche Bank's Emmanuel Rosner (Emmanuel Rosner) lowered expectations for Tesla deliveries again due to similar concerns.

Tesla announced deliveries a few days after the end of the quarter, and the first quarter data may be released as early as Monday. FactSet's consensus is that Tesla's delivery volume of 457,000 electric vehicles is lower than the 423,000 units in the first quarter of 2023, and also lower than the 494,000 units expected at the end of January.

In a note to customers, Ives wrote, “While supply issues (planned factory shutdown/Berlin fire) affected supply, it is undeniable that this was an unforgettable quarter for Musk and Tesla.

Wade Bush reiterated his “outperforming the market” rating for Tesla stock, but lowered the target share price from $315 to $300, which is still 67% higher than the current price.

Deutsche Bank's Rosner said that Tesla's forecast was lowered from 427,000 units to 414,000 units, mainly due to lower sales volume than expected in the Chinese market and plans to cut production in China.

Rosner also lowered Tesla's 2024 delivery forecast to about 1.9 million vehicles, while the consensus was about 2.06 million vehicles. Margins and earnings are under continued pressure as the company announced “deep” price cuts in China and Europe earlier in the quarter and made other price adjustments in February to boost sales.

Rosner said, “Although Tesla announced that it will raise prices in the US and China from April, we think this is only to boost sales in March, not a sign of steady demand.”

Ives said that as competition heats up and the price war continues, the Chinese market is Tesla's biggest challenge, and Tesla will continue to fight against it in 2024.

Wade Bush currently predicts that Tesla's deliveries to the Chinese market this quarter will drop by 3% to 4% compared to the same period last year. Ives expects Tesla sales data to be released on Tuesday. “This will not be a time for bulls to celebrate; on the contrary, for Tesla investors, it is a time for investors to rip off band-aids.”

Ives said that Tesla's negative rhetoric has reached its highest point in the past few years, and Musk and the company have been attacked by bears. He added that this time it makes sense because growth is weak and profit margins have also been compressed due to its sales volume in China.

“For Musk, this is a critical time for Tesla to get through this turbulent period, otherwise the future may be even darker,” he said.

Wade Bush remains optimistic about the company's fully driving/autonomous driving technology, and believes this is a key part of the disruptive technology story. Ives said that Musk's remarks about building an artificial intelligence system outside of Tesla, the question of how the board of directors uses its supervisory powers, the Delaware court's decision to cancel Musk's compensation plan, and possible steps to re-register the company in Texas all challenge investors' patience.

He wrote, “To reverse the situation, Musk needs to give a formal margin for profit margins and deliveries in 2024, propose strategies to solve weak sales and reverse trends in a conference call, host a battery/AI day, provide investors with a complete blueprint, promise to be Tesla's CEO for the next three to five years, and launch a real advertising campaign.

Wade Bush remains optimistic about Tesla's mid-term prospects and expects the company to maintain its dominant position in the electric vehicle market.

Ives said, “However, getting through this heated period will be a defining chapter in the future of Musk and Tesla.