Tesla: Barclays expects deliveries beat; sees more price cuts

© Reuters.

By Senad Karaahmetovic

Barclays analysts reiterated an Overweight rating and a $275.00 per share price target on Tesla (NASDAQ:TSLA) as the electric vehicle (EV) giant prepares to publish 1Q23 deliveries and production numbers.

Analysts expect that Tesla will manage to deliver 425,000 EV units in Q1, which compares to 405,000 delivered for the same period last year and to the consensus of 420,000.

“Concerns have built on the pace of deliveries amid weakening demand signals. However, we believe commentary on the pace of production likely implies some upside, which we assume will be ~430k units in the quarter. And assuming production only modestly outpaces deliveries (a reasonable assumption, as there was already a large inventory build in 4Q22), it supports upside results vs. consensus,” they wrote in a client note.

In case Tesla delivers higher-than-expected numbers, the beat “could be a catalyst for the stock, as expectations have come down amid signs of softening demand.”

On a more negative note, the analysts also argue that inventory is likely to remain elevated.

“While we appreciate that Tesla inventory is likely low relative to other automakers, the increase in inventory has been unusual for Tesla, which has historically operated tight on inventory given its use of a build-to-order mode.”

Barclays analysts also expect Elon Musk’s company to continue cutting prices to increase demand as Tesla can better afford price cuts relative to its rivals.

“We believe price cuts are likely to be core for Tesla in unlocking additional volume, especially as Tesla ramps on further capacity,” they added.

Finally, the analysts also discussed Tesla benefiting from the Inflation Reduction Act (IRA), which is seen as a “pleasant boost, but will likely step back after March.”