Tesla Inc's first-quarter margins are anticipated to have hit a more than three-year low as the electric-vehicle maker slashed prices to lure more buyers in the face of rising competition and a weak economy.
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Tesla Inc's first-quarter margins are anticipated to have hit a more than three-year low as the electric-vehicle maker slashed prices to lure more buyers in the face of rising competition and a weak economy.
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Leading
electric vehicle (EV) maker Tesla (
NASDAQ:TSLA
) is scheduled to announce its first-quarter
earnings after the stock market closes on April 19. The company
failed to impress investors with its Q1 deliveries of 422,875 vehicles, which marked a 36% year-over-year growth but was lower than the 440,808 vehicles produced in the quarter. This raised concerns about continued inventory build-up. Moreover, investors are keen to know about the impact of Tesla’s multiple price cuts on Q1 margins.
Tesla’s Q1 Margins in Focus
Tesla’s CEO
Elon Musk triggered a price war in the EV space through multiple price cuts in the U.S., Europe, China, and other regions. Recently,
Tesla slashed prices in Europe, Singapore, and Israel. This month, the company announced another round of price cuts in the U.S.
The company is trying to spur demand amid macro pressures and growing competition. Analysts have mixed opinions about the impact of price cuts on Tesla’s margins.
Last week, Baird analyst
Ben Kallo reiterated a Buy rating on Tesla with a price target of $252 in reaction to the company’s
latest price cuts in the U.S.
Kallo continues to believe in the company’s ability to deliver industry-leading operating margins. He feels that Tesla is in the best position to weather economic headwinds.
In contrast, another analyst, Wells Fargo's
Colin Langan, reaffirmed a Hold rating last week. He gave a price target of $190 in reaction to the company’s most recent U.S. price cuts. Langan expects Tesla’s Q1 auto gross margins to miss the greater than 20% target. The analyst expects Q1 EPS of $0.69, which he pointed out was below the consensus estimate of $0.86.
The analyst noted that while price cuts boosted Q1 deliveries, the company will need higher deliveries to achieve its full-year target of two million vehicles. “This implies a risk of more price cuts, without at least a major refresh,” said Langan.
Overall, Wall Street’s consensus
Q1 EPS estimate of $0.86 reflects a year-over-year decline of nearly 20%. Meanwhile, the company’s revenue is expected to increase by over 26% to $23.73 billion.
Further, TipRanks’ Website Traffic Tool indicates that
visits to tesla.com grew 23.4% year-over-year in Q1 2023. The year-over-year growth rate in website visits bodes well for Q1 revenue.
Is Tesla a Buy, Sell, or Hold?
Wall Street is cautiously optimistic about Tesla, with a Moderate Buy consensus rating based on 19 Buys, 10 Holds, and three Sells. The average
TSLA stock price target of $219.57 suggests nearly 19% upside potential.
Conclusion
Earlier this year, Tesla impressed investors with its
market-beating Q4 2022 results. The focus this time would be on the company’s first-quarter margins following price cuts in key markets. Investors will also pay attention to management’s comments on demand in a tough macro backdrop and any updates on new models.
Disclosure
A wave of price cuts by Tesla is a "warning" for rival manufacturers of electric vehicles, the chief executive of French car maker Renault's flagship brand said on Monday.
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Workers from Tesla's Shanghai factory are taking to social media to appeal to Elon Musk and the Chinese public after being informed over the weekend about planned cuts to their performance bonuses, according to online posts and workers.
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