2024 for Tesla (NASDAQ:TSLA) looks tough, according to analysts at Bernstein, who said they believe the electric vehicle giant will see lower margins and disappoint in volumes.
In a note, the investment firm stated that Tesla's Q4 deliveries of 485,000 were broadly in line with the sell-side consensus of 480,500, bringing full-year 2023 deliveries to 1.81 million, in line with company guidance.
However, they note that auto gross margins ex-credits are a key question. "We model 15.7% vs consensus of 17.8% but see potential downside given the impact of price cuts in September and October as well as significant discounting of "inventory" models in the quarter," analysts at Bernstein, who have an Underperform rating and $150 price target on the electric vehicle giant.
"Mechanically flowing through Q4 price cuts (off list and inventory) to the P&L would imply a sequential ASP decline of 250 to 400 bps while consensus is modeling for a 0.5% decrease," they added.
For FY 24, Bernstein is below consensus on deliveries (2.15M vs. 2.2M) and on EPS ($2.59 vs. $3.31). The firm does not believe Tesla can further cut prices enough to drive sufficient demand elasticity without potentially becoming free cash flow (FCF) negative.
"Moreover, Tesla's models will be one year older in 2024, penetration will be higher, and Cybertruck will be an estimated 100 bps headwind to auto GMs," the analysts commented.
"The stock now trades at ~200x trailing TTM FCF, and nearly100x EPS, which is out of whack relative to higher margin growth tech companies," they added. "Moreover, we believe more investors will begin to increasingly question the company's growth narrative, particularly since we believe that Tesla will struggle to grow deliveries 20% in 2024 (and 2025)."