There's no way around that, as 1Q24 comes to a close, this has been a terrible quarter for Tesla (NASDAQ: TSLA). This was clear on both sides of the supply and demand equation. Planned plant downtimes and a fire next to its Berlin plant have affected supply, exacerbated by upgrade issues with the Model 3 Highland in the U.S., but it's not as if consumers are lining up for new cars.
Like the rest of the industry, Tesla has had to contend with declining demand and its first-quarter delivery estimates have now been cut from 475,000 to 425,000. All other concerns trump the trends emerging in the highly competitive key market of China, which has made even one of the biggest Tesla bulls On the Street believes it's time to reassess the electric car giant's prospects.
It's time for a reality check, says Daniel Ives, a 5-star Wedbush analyst.
“Chinese demand is still very weak heading out of 2024,” Ive said. “In the last two weeks, soft delivery data has now taken 2.1 million units for the year as a baseline with 2.0 million units as a more realistic target to achieve for 2024 and our numbers are falling accordingly. We now estimate that deliveries in China are down 3%-4% year-on-year in This quarter. We expect the first quarter delivery numbers to be released next Tuesday morning, and this will not be a moment of celebration for the bulls, but instead a quarterly teardown for Tesla investors.
For now, Ives says, Tesla's narrative is as bad as it's ever been, but unlike in the past, the current negative sentiment is “justified because growth has been slow and margins are showing pressure with China a nightmare.”
While Ives remains generally confident in the company's FSD/Autopilot strategy and remains “optimistic on Tesla over the next few years,” he nonetheless admits that patience is “beginning to wear very thin among investors,” he explained. “This is exacerbated by Musk's AI.” Outside of the Tesla chatter, the board issues, the Delaware Musk cancellation, and now a potential merger move in Texas.”
According to Ives, to turn the situation around, Tesla and Musk must implement the following measures: 1) provide a clear set of guidelines for margins and deliveries in 2024, 2) hold a conference call in the first quarter that addresses demand challenges in China and outlines a strategy to counter the decline, 3) Organize a battery/AI event and outline the roadmap and monetization plan for the coming years, 4) Musk should pledge to continue as Tesla CEO for the next 3-5 years, focusing on its AI initiatives and 5) Start a campaign Real advertising.
Ives believes the current situation merits a lower target price, which he lowers from $315 to $300. However, there is still a potential upside of 70% from current levels. Ives' rating remains Outperform (i.e. Buy). (To watch Ives' record, click here)
Turning our attention to the rest of the market, TSLA is backed by 8 other analysts who also rate the stock as a Buy, while 19 suggest a Hold, and 7 recommend a Sell. This results in an overall consensus rating of Hold. With an average target of $198.72, shares are expected to return 13% next year. (be seen Tesla stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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