Bernstein reiterated their Underperform rating on Tesla (NASDAQ:TSLA), with a 12-month price target of $150.00 on the electric vehicle stock, as analysts with the research company believe FY24 consensus margin and volume estimates remain too high.
“Throughout this year, Tesla bulls have been calling for margins to bottom as ongoing cost reductions increasingly offset the impact of price cuts,” write the analysts in a note. “Instead, margins have missed expectations and declined sequentially every quarter this year.”
Consensus projections expect Tesla to produce around 2.3M units in 2024, a 500,000 unit increase from the previous year. However, to achieve 500,000 units in 2023, the automaker had to reduce prices by approximately 16%, which put significant pressure on their overall operating margins, decreasing them by 750 basis points.
Whether Tesla can further decrease prices to boost demand without risking a negative free cash flow remains uncertain. Bernstein believes that Tesla might need to guide for lower deliveries compared to consensus estimates for the next year, which would likely result in reduced profit margins.
Bernstein forecasts 2.15M deliveries in 2024 (vs 2.3M in consensus) and EPS of $2.59 (compared to the consensus estimate of $3.30).
Shares of TSLA are up 1.11% in pre-market trading Monday morning.