Deutsche Bank analysts suggested today that Tesla (NASDAQ:TSLA) stock is likely to face "significant pressure" in the near future.
The investment bank’s research note sheds light on the potential challenges that Tesla may encounter, providing investors with insights into the future trajectory of the company's stock performance.
Tesla earnings/deliveries preview
Analysts are downbeat on the company’s first-quarter deliveries and the outlook in the near-term. Wedbush recently cut its Tesla price target to $300 from $315, telling investors that deliveries have been a nightmare this quarter.
"Let's call it like it is: 1Q deliveries has been a nightmare quarter for Tesla as China demand remains very soft coming out of the gates for 2024,” the firm stated in a note. “While supply issues (factory planned downtimes/Berlin fire) has impacted supply, there is no denying this has been a quarter to forget for Musk and Tesla.”
“1Q delivery estimates have now gone from 475k to 425k as Tesla saw a perfect storm of demand issues hit this quarter, which hurt delivery/sales.”
Meanwhile, Citi also recently cut its Tesla price target to $196 from $224, stating that it expects a first-quarter deliveries miss.
“Ahead of Tesla’s Q1 delivery release, we’re lowering estimates to reflect recent data points. Our Q1 delivery estimate goes to 429.9k from 473.3k,” said the bank's analysts.
They added: “While buy-side Q1 delivery estimates (we believe in the low 400s range) sit well below the sell-side consensus (460-470k, but coming down), the setup remains challenging with street estimates still looking too high, not only for 2024 but also 2025.”
Mizuho downgraded Tesla to Neutral in a recent note, telling investors that in the near term, Tesla’s deliveries remain challenging.
Elsewhere, Deutsche Bank lowered its first-quarter delivery expectations and further reduced its estimates for the quarter and the year following weaker-than-expected China sales and Tesla’s recent plan to cut production in the region
“For Q1, we now expect ~414k units, down from 427k units prior, due to weaker-than-expected sales in China in the last few weeks of March. We also cut our full year deliveries estimate to ~1.9m units (consensus: ~2.06m units), now representing only mid-single digit growth for the year (vs. HSD prior),” said the firm.
Tesla stock forecast
Deutsche Bank also stated that they continue to see pressure on margins and earnings, as Tesla has already “announced deep price cuts in both China and Europe earlier in the quarter and made further moderate price adjustments in February to incentivize vehicle purchases.”
“Although Tesla has announced it will raise prices in the U.S. and China effective April, we view it as an attempt to boost sales in March rather than a sign of solid demand,” added Deutsche Bank.
Due to their view on Tesla deliveries, the firm also sees a risk to earnings in the quarter. Looking at the full year, they continue to see a “large risk” to earnings expectations due to continued downside to volume and pricing expectations.
The worries over volume and earnings “could further dampen investor sentiment and put significant pressure on the stock, especially considering the meaningful downside risk we see to 2025 earnings as well,” stated Deutsche Bank.
Redburn analysts recently reiterated a Sell rating on TSLA stock.
“We highlight the risk of further disappointment. Tesla’s stickier unit costs amplifies its exposure to weakening EV pricing."
Similarly, Citi analysts cut the price target on Tesla shares and added that “the setup remains challenging with street estimates still looking too high, not only for 2024 but also 2025.”
“Net-net, our view from a few weeks ago is unchanged—we remain Neutral-rated awaiting a more convincing entry point.