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Bernstein cuts Tesla estimates to 'significantly' below consensus on EV demand issues

Stock Markets Dec 07, 2022 06:37AM ET
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© Reuters. Bernstein's Sacconaghi cuts Tesla (TSLA) estimates to 'significantly' below consensus on EV demand issues
 
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By Senad Karaahmetovic

Bernstein analysts lowered fourth-quarter and full-year estimates on Tesla (NASDAQ:TSLA) to numbers that are “comfortable below consensus” as the company “increasingly appears to have a demand issue.”

They believe Tesla has finally started to experience slowdown after the electric vehicle (EV) maker cut prices in China and the U.S., and “purportedly” decreased China production. The price cuts are negatively impacting average selling prices (ASPs) by 2.6%, or $1,400 per EV unit, the analysts added.

“All else equal, this points to a 200 bps decrease in automotive gross margins. We suspect the net impact will be lower, but believe that consensus estimates for automotive gross margins improving 110 bps sequentially in Q4 may be at risk,” the analysts said in a client note.

Moreover, they believe Tesla will be forced to cut prices again in 2023 to boost EV demand, as well as introduce permanent cuts in the U.S. to qualify for Inflation Reduction Act (IRA) rebates.

On a more positive note, the EV maker could see its margins expand due to:

  1. Improving margins in TX and Berlin ($900/car);
  2. Manufacturing improvements (including lower input & logistics costs - perhaps up to $1,000/car);
  3. Opex leverage (~$1,100/car);
  4. IRA tax credits on cell manufacturing (up to $625/car).

“On net, we believe TSLA has the potential to offset $2,000-3,600/car in price cuts next year, though much of it could be in op ex & tax credits,” they added.

Bernstein's new FQ4 forecast now calls for earnings per share of $1.17 on revenue of $25.3 billion, below the average analyst estimate of $1.26 on revenue of $26.1B. For FY23, Bernstein projects EPS of $4.96 on revenue of $111B, again below the consensus of $5.59 on sales of $116B.

“Given TSLA's pullback YTD, we see current risk/reward on the stock as more balanced, though still somewhat negative, due to Tesla's absolute valuation, and the increasing risk of downward revisions amid potential demand challenges,” the analysts concluded.

Tesla stock, which Bernstein rates as Underperform with a $150 per share price target, closed at $179.82 yesterday.

Bernstein cuts Tesla estimates to 'significantly' below consensus on EV demand issues
 

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Comments (1)
Gregorio Arevalo
Gregorio Arevalo Dec 07, 2022 7:19AM ET
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What these Bernstein analysts don’t realize is that Tesla, unlike all the other automakers, has practically no debt and has stashed a mountain of cash, accumulated over the past few years. This cash will enable Tesla to continue it capital investment program, opening new production plants and improving productivity in existing ones WITHOUT having to borrow at high interest rates in the current environment. That provides Tesla with a huge advantage which will also be reflected in a substantial upside in the value of its stock.
JJ JJ
JJ JJ Dec 07, 2022 7:19AM ET
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Tesla having no debt?? You live in a dream world.
Koray Özdemir
Koray Özdemir Dec 07, 2022 7:19AM ET
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JJ JJ  Tesla's net debt—that is, its total debt minus cash—is negative at -$10.7 billion, which means that Tesla can pay its debt in full and still have more than ten billion dollars left on its balance sheet: more than enough for a significant share buyback.
Koray Özdemir
Koray Özdemir Dec 07, 2022 7:19AM ET
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JJ JJ  Tesla's net debt—that is, its total debt minus cash—is negative at -$10.7 billion, which means that Tesla can pay its debt in full and still have more than ten billion dollars left on its balance sheet: more than enough for a significant share buyback.
 
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