Piper Sandler analyst cuts Tesla’s price target and delivery forecast: criticism "aging product range"

• Tesla’s profit margins have not been convincing recently
• Piper Sandler analyst criticizes Tesla’s product range
• Price target and delivery forecast lowered

Tesla with disappointing profit margins

Tesla recently came into the focus of investors when a Wall Street analyst questioned the company’s short-term earnings performance. For much of the past six months, Tesla has lagged behind its Magnificent 7 competitors. This is partly due to a high-risk strategy that prioritizes gaining market share over increasing profits, The Street explains. This strategy was driven by a series of price cuts in key markets in the US, Europe and China. The Roundhill Magnificent Seven ETF, which trades under the ticker symbol MAGS, is up more than 11 percent so far this year, while Tesla shares are down around 24 percent. Compared to competitors such as Meta Platforms, which rose by around 34 percent in the same period, a sobering result (as of February 14, 2024).

Tesla’s profit margins, probably the most closely followed metric by Wall Street analysts, narrowed to 17.6 percent in the three months ended December. According to The Street, this is mainly due to the price cuts. Together with weaker-than-expected earnings of $0.71 per share, this gave additional impetus to bets against the world’s largest electric vehicle manufacturer.

Piper Sandler criticizes aging product range

According to The Street, Alexander Potter, an analyst at Piper Sandler, believes that there will be further price cuts at Tesla. The reason for this is an “older product range”. He also lowered his forecast for 2024 deliveries by about 11.5 percent to 1.93 million units after the company reported disappointing results for the fourth quarter of 2023 last month. Although Tesla’s net income increased to $7.9 billion compared to the fourth quarter of 2022, a significant portion of this was due to a deferred tax gain of $5.9 billion. The costs associated with AI projects and the delayed market launch of the Cybertruck pickup significantly impacted the bottom line.

The group also said that growth rates in 2024, as measured by vehicle deliveries, are expected to be “significantly lower” than in 2023. Wall Street forecasts suggest that sales growth in 2024 is expected to be 10 percent , which represents a full-year value of around $107 billion. Alexander Potter has also lowered his price target for Tesla by $70 to $225 per share while reaffirming his overweight rating. The analyst pointed to the potential for revenue generation from the expanding energy business, which he estimates will contribute about 12 percent of revenue growth in 2025, twice as much as last year’s 6 percent. Potter values ​​Tesla’s automotive division, excluding its full self-driving driver assistance system, at about $135 per share, while the rest of his $225 target comes from its Tesla Energy division. Potter expressed the assessment that Tesla is poised to capture a 15 to 20 percent market share of global stationary battery use.

According to data from TipRanks, Tesla shares have received 34 ratings from Wall Street analysts in the past three months (12x buy, 17x hold, 5x sell), which results in a hold recommendation for the company’s papers around the jack-of-all-trades Musk. The average price target is $220.26, representing a potential change of 19.69 percent from the previous price of $184.02 (as of 02/13/24).

Tesla “between two waves of growth”

Last month expressed Elon Musk even told investors that Tesla was currently in the midst of two significant growth phases. The company’s next push will be driven by the development of fully autonomous driving, next-generation vehicles and advances in energy storage.

Editorial team finanzen.net

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