Analysts seem to agree that lower prices mean lower profits. However, not everyone is seeing eye to eye on how big the price cuts will affect the company and its share price.
Bernstein analyst Tony Sacconaghi He believes the effect will be “enormous”. It lowered its estimated dividend for 2023 to $3.80 per share from $4.96. Sacconaghi believes the price cuts were a response to lower demand
(Ticker: TSLA) Electric Vehicles. It didn’t see evidence of an increase in orders in China after Tesla cut prices on Jan. 6.
Insurance registration data from China shows that about 13,000 Tesla cars were registered in the week after the cut, up from about 2,000 vehicles in the week before the cut. However, insurance registration data is volatile from week to week.
Sacconaghi rates Tesla shares for sale and has a stock price target of $150. Wedbush Analyst Dan Ives Buy stock prices. His price target is $175. He wrote on Friday that rate cuts are wise and a smart strategic move as the economy weakens.
“This is a clear shot across the bow at European automakers and Americans…that Tesla is not going to play nice in the sandbox with the EV price war now underway,” Ives added. “The margins are going to be hit on this one, but we love this strategic poker move by Musk and Tesla.”
Ives kept his estimated earnings for 2023 at $5.35 a share and is waiting to see how things develop in the coming months. Costs are coming down, along with prices, and Ives thinks the cuts could also lead to 12% to 15% more cars being sold this year. If the cost-price-volume equation doesn’t work out as he expects, earnings per share could be in the $4.50 range for 2023, according to the analyst.
Deutsche Bank Analyst Emmanuel Rosner It also ranks buying Tesla shares. His earnings per share for 2023 are estimated at $3.80. Like Ives, he did not change it after the sales, because he expected lower prices. Rosner wrote Friday that Tesla’s earnings per share could be as high as $4.50 in 2023 depending on how sales volume changes and customers’ willingness to buy higher-priced standalone dive features after discounts.
Like Rosner, a Wells Fargo analyst Colin Langan The EPS estimate for 2023 was $3.80 before the price cut. However, Langan cut its 2023 earnings estimate to $2.90 per share on Monday.
Langan sees others in the industry following Tesla’s lead and its lower prices leading to more electric vehicle sales, but the positives aren’t enough to overcome pressure on profit margins from lower prices. He values the stock contract and has a price target of $130 per share.
Bank of America Securities analyst John Murphy also rates Tesla stock on hold with a $130 price target. He cut his 2023 earnings per share estimate to $4 from $4.15. “Rate cuts are negative for margins and positive for growth,” Murphy wrote on Tuesday.
According to FactSet, about 25 analysts have cut numbers since the price cut, and there are about 45 covering the stock.
The estimate for 2023 earnings per share is now at around $4.90, down from around $5.50 at the start of the year, according to FactSet. That’s from 60 cents. Some analysts, of course, are still holding onto the estimates. If everyone is lowering estimates at the same rate, the consensus estimate for 2023 could drop by about $1 to $4.50 per share compared to estimates from the end of 2023.
The range of estimates is wide, ranging from about $2.90 to about $8. At the start of the year, Tesla’s 2023 earnings estimate range extended from $3.80 to $8.
Estimates for Tesla’s 2023 earnings per share peaked at around $6.10 per share in September. The range of estimates at the time was between $4 and $12 a share.
So far, investors are taking all the cuts step by step. Tesla stock was up 5.4% at midday at $129 a share. the
They decreased by about 0.2% and 1.1%, respectively.
Tesla stock fell more than 6% in Friday trading in response to price cuts in the United States. Shares rose throughout the day, closing down 0.9% at $122.40.
Barron He recently wrote positively about Tesla stock believing that the company is the leader in disruptive technology and that the stock has fallen enough to be attractive. Car prices and the cut in profit estimates for 2023 didn’t come as a surprise. But there will be some surprise this year. The entire industry is facing a lot of uncertainty amid rising interest rates and a weak consumer economy.
Investors will want answers to some questions about profit margins and demand when Tesla reports fourth-quarter numbers on January 25th.
During midday trading Tuesday, Tesla stock is up about 14% since then Barron Positive article on January 6th.
Write to Al Root at [email protected]
“Infuriatingly humble alcohol fanatic. Unapologetic beer practitioner. Analyst.”