Deutsche Bank (DB) reiterated a Buy rating on Tesla (NASDAQ:TSLA) but cut their 12-month price target on the electric automaker over heightened concerns around 2024.
“Tesla’s very limited outlook commentary last night, in our view confirmed our caution around 2024, in which the company will likely see very limited volume growth and pressure on earnings.” Wrote DB analysts in a note.
In line with comments made at DB's late-2023 DB AutoTech Conference, Tesla's management has described 2024 as a transitional year between the recent global expansion driven by Model 3/Y and the upcoming next-gen vehicle platform.
Tesla has officially stated its aim to begin production of the next-gen vehicle in the second half of 2025. Despite limited growth projections for 2024 and possibly 2025, this announcement is seen by DB as a minor positive, providing a glimpse of future expansion.
While Tesla hasn't disclosed a specific volume target for the year, DB analysts estimate it to be around 2.0-2.1 million units, indicating minimal growth that might necessitate significant price reductions.
Looking ahead, DB analysts predict potential tailwinds from factors such as raw materials and logistics, along with improved factory efficiencies in 2024. However, these advantages are expected to be outweighed by challenges such as price declines, increased labor costs, and the ongoing ramp-up of the Cybertruck.
Consequently, DB has revised its 2024 gross margin estimate (excluding credits) to 15.3%, down from the previous 16.4%, leading to a reduced EPS projection of $2.50 for the year, compared to their prior estimate of $3.10.
Shares of TSLA are down 12.56% in afternoon trading on Thursday.