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Tesla's pricing strategy impacts EV sector, Goldman Sachs revises EPS forecast
Editor
Published Sep 18, 2023 01:13PM ET
Updated Sep 18, 2023 01:13PM ET
© Reuters.
In a significant development for the electric vehicle (EV) sector, Tesla (NASDAQ:TSLA) has been wielding considerable influence through its series of price reductions implemented this year. This strategy, according to Goldman Sachs analysts, is anticipated to continue into next year, potentially affecting the company's profit margins.
The price cuts primarily target Tesla's Model S and Model X vehicles and are expected to impact the company's financial performance this year, as noted by Goldman Sachs analyst Mark Delaney. These reductions are predicted to be only partially offset by increased prices for the Model 3, resulting in lower average selling prices across Tesla's portfolio and consequently affecting gross margins.
Further price decreases are forecasted by Delaney for 2024 to boost sales volumes. This move is expected to counterbalance the earnings per share (EPS) advantage gained from cost reductions.
In light of these developments, Goldman Sachs analysts have revised their predictions for Tesla's EPS, inclusive of stock-based compensation. The projected EPS for this year has been lowered from $3.00 to $2.90, and their 2024 EPS forecast has been cut from $4.25 to $4.15.
These revised forecasts closely align with general market expectations. The consensus among analysts tracked by FactSet is an EPS of $2.89 for this year and an estimate of $4.50 for 2024.
Despite the financial adjustments, Delaney maintains his projection that Tesla will deliver approximately 2.3 million vehicles in 2024, an increase from the expected 1.8 million deliveries this year. This forecast is in line with Wall Street estimates.
Regarding Tesla's stock performance, Delaney retains a Neutral rating with a 12-month target price of $275. As of early trading on Monday, Tesla shares had declined by 2.5% to $267.51, despite having more than doubled over the course of this year.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
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