Barclays remains sidelined on Tesla (NASDAQ:TSLA) with an Equal-Weight rating but cut their 12-month price target on the EV stock to $250.00 (From $260.00) as analysts are predicting further price cuts, placing pressure on profit margins.
“In the US, we expect price declines from the broader industry this year amid normalized supply dynamics,” wrote analysts in a note.
The expected cuts may challenge Tesla as ICE remains its main rival in the US.
Barclays a roughly 2% decrease in ATPs for US retail in 2024. Moreover, continuous price decreases by Chinese domestic OEMs, especially BYD, could introduce more competition in China. Tesla experienced a slight decline in its China BEV market share throughout 2023 despite pricing adjustments.
Declining demand for EVs presents a new challenge for Tesla. Historically, Tesla has faced supply constraints, with delivery volume determined by production output. However, analysts suggest that the key theme for Tesla in 2024 is the shift to facing volume pressure in an environment where demand is constrained. This marks a departure from the past, as volume is expected to be more influenced by demand than by Tesla's production capacity. This shift may prompt investors to reassess their long-term volume expectations for the company.
Barclays anticipates Tesla delivering 1.97 million units in 2024, falling short of the consensus projection of 2.19 million units. This reflects a modest 9% year-on-year growth in deliveries, significantly below Tesla's earlier target of achieving a 50% CAGR.
Barclays suggests there is a possibility of a potentially disappointing 2024 volume guidance, around 2 million units. However, they also note that CEO Elon Musk might generate interest during the call by alluding to the potential for 2.2-2.4 million units if the macroeconomic and interest rate environment is more favorable.
Barclays adjusted their EPS estimates on Tesla and now estimates a 2024 EPS of $3.02, well below the consensus estimate of ~$3.80. If correct, this would mark the second straight year of negative earnings growth for Tesla.
Shares of TSLA are down 2.9% in mid-day trading on Wednesday.