Analysts are largely cautious about Tesla and the broader auto industry ahead of the electric car company’s earnings report on Wednesday. Tesla shares fell 15% in January, starting the year in stark contrast to last year’s stunning performance. Analysts have begun to doubt the stock’s high valuation, especially as Tesla faces price cuts, increased competition from other automakers, especially China, and high borrowing costs. Tesla’s poor performance so far this year has also dragged down investor sentiment towards a group of technology stocks known as the “Seven Hao”. TSLA 1Y Tesla’s stock price over the past year. After the Big Seven posted huge returns last year, some investors have been worried the group would lose its clear market leadership amid a pullback as the market rally widened. Big tech stocks have been hovering near the flatline this week, with Tesla lagging. Here are analysts’ expectations for Tesla’s earnings this week from several major companies: Bank of America: The earnings forecast is due to rising U.S. sales, global electric vehicle production and steady growth, according to Bank of America analyst John Murphy. Pricing, Tesla should deliver strong results in 2023. Price cuts were also reduced in the fourth quarter. But Murphy wrote in a note on Monday that worsening electrification sentiment in the fourth quarter could impact EV expectations. The production outlook “should be key, as output is widely expected to be flat or slightly lower in 2024,” he added. His $290 price target implies potential upside of 38.7% from Tuesday’s closing price. Upside risks include continued increases in natural gas prices, breakthroughs in advanced battery technology and better cost controls. Downside risks include the inability to continue raising low-cost capital and generate positive earnings and free cash flow, Murphy said. Wells Fargo is bearish on the electric car maker, forecasting fourth-quarter earnings of 59 cents per share, compared with the consensus estimate of 72 cents per share. “Tesla’s screening is most at risk,” analyst Colin Langan wrote in a Jan. 16 note. He maintained an equal-weight rating on the stock with a $223 price target, which suggested the stock would be 12 percent higher in the next 12 months. May rise 6.6%. However, Langan raised his year-end earnings per share forecast to $3 from $2.95 to reflect Tesla’s record fourth-quarter delivery of about 485,000 vehicles. Morgan Stanley slashed its price target on Tesla, but remains one of the most bullish on the electric car maker. Analyst Adam Jonas lowered the target price of electric vehicles by US$35 to US$345 before the company’s financial report was released, citing challenges for electric vehicles in the coming year. This suggests potential upside of nearly 65%. “We do not want to wait for the outlook for FY24 to be clearly cautious, but rather look to adjust our FY24 and FY25 forecasts in advance based on market conditions,” he wrote in a note on Monday. “Increasingly, The evidence shows that the global electric vehicle market is in an unfavorable balance between supply (growth) and demand (slowing).” Considering Tesla’s car market share, Jonas said that the adverse development of the global electric vehicle market is detrimental to Tesla” Very important” and could hurt its stock price. Jonas pointed out that Tesla is as much an energy, artificial intelligence and robotics company as it is a car stock, and he valued the company’s core car business at only 22% of the target price. He pointed out that his overweight rating on the stock depends more on its value as an artificial intelligence company. Deutsche Bank Deutsche Bank Research sees downside risks to Tesla’s 2024 sales and profit margin outlook. Analyst Emmanuel Rosner said this risk is “due to sales prospects well below market expectations, pricing pressure, Cybertruck margin impact and higher tax rates in China.” Rosner said he expects prices to drop about 6% this year due to global demand constraints and considering Tesla’s Model 3 rear-wheel drive and Model 3 Long Range models no longer qualify for tax credits. Analysts rate Tesla stock a buy with a price target of $260. UBS Group AG (UBS) UBS believes that Tesla’s stock price has experienced negative effects this year. Like other analysts, the company is cautious on its 2024 guidance for U.S. autos and auto parts. “Unit size will be guided to be 2.1mm (UBS 2.0mm, consensus 2.17mm). Higher unit sizes may require more price cuts,” analyst Joseph Spak said in a Jan. 15 note Tesla profit predictions made. “With fierce competition in China and slower growth in the U.S./Europe, our 2024 growth forecast of 16.2% versus Wall Street’s 18.5% looks too aggressive for us.” The firm has a Neutral rating on the stock. rating, and its new $229 price target suggests the stock could rise 9.5% from Tuesday’s close. UBS’s previous price target was $250.
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