By Michael Elkins
Deutsche Bank reiterated a Buy rating and $250.00 price target on Tesla Inc. (NASDAQ:TSLA) ahead of the electric automaker's 1Q23 delivery and production numbers, which are expected to be reported this weekend.
Deutsche Bank trimmed their 1Q delivery estimate lower to 416k units (+34% YoY, +3% QoQ), reflecting the continued uncertainty in the macro environment after the price cuts, as well as competitive pricing responses in China. They estimate Tesla delivered about 135k units of Model 3+Y in China, with the rest to come from N. America (168k), Europe (73k), and RoW (25k).
All in, Deutsche Bank's 1Q revenue is lowered to $22.5bn on trimmed volume, down from $23.3bn. At the same time, they cut gross margin (ex-credit) expectations from -420bps q/q previously to -600bps q/q, landing at 18.3% for the quarter reflecting some sequential improvement in factory and battery ramp cost and favorable contribution from IRA battery production credit but more than offset by recent price cuts in China, the U.S., and Europe.
Deutsche analysts wrote in a note, "1Q is positioned to be the trough for the year, and while management had indicated that it would still see auto GM (ex-credit, including FSD) remain in the 20%+ range at any single quarter in the year, much of this will depend on the volume/pricing dynamics and macro conditions throughout the year which in of itself is challenging to predict. Our new estimates lead to Q1 EPS of $0.69 vs. prior $0.84, below current Street revenue estimate of $23.5bn and Street EPS forecast $0.87."
Beyond the quarter, the analysts believe that the SOP at Tesla's Mexico facility for the next-gen platform could take place in late 2024 or early 2025. Prior to this, they anticipate the company to unveil at least a new model within the platform, potentially towards year-end 2023.
Shares of TSLA are down 1.53% in mid-day trading on Tuesday.