Tesla (TSLA) has reported its Q1 earnings, which have generated a mixed response from analysts. While some have praised Tesla’s strong delivery numbers and revenue growth, others are concerned about the company’s long-term profitability and growth prospects.
Tesla’s shares dropped by almost 10% on Thursday, April 20, 2023, after the EV maker reported a decline in its margins and the implications of its aggressive price cuts. Tesla attributed the margin pressure to higher costs related to supply chain issues, new product launches, and factory expansions.
Tesla also lowered its prices six times this year, in a bid to boost demand and maintain its market share in the face of increasing competition from other EV makers. Tesla CEO Elon Musk said that the company prioritized volume over profit in a weak macroeconomic environment and that it would continue to do so until it achieved full autonomy.
Here are some of the highlights from analysts’ comments:
- Wedbush analyst Dan Ives cut his price target on Tesla from $225 to $215, but maintained his outperform rating. He said that margins were “a delicate issue that are keeping Tesla investors up at night” and that Tesla was “walking a tight rope” between margin pressure and demand stimulation. He also said that Tesla’s delivery guidance of 1.8 million vehicles for 2023 was achievable.
- RBC analyst Tom Narayan lowered his price target on Tesla from $190 to $180 and kept his sector perform rating. He said that Tesla’s price cuts were “the right strategy” in the long term, but they would cause “pain” in the short term. He also said that margins would “get worse before they get better”.
- Canaccord Genuity analysts Jed Dorsheimer and Michael Walkley maintained their buy rating on Tesla but reduced their price target from $230 to $220. They said that investors would focus on the demand response to Tesla’s pricing actions in the near term and that they expected the stock to recover from the “near-term pressure”. They also said that Tesla had a “clear lead” in EV technology and innovation.
- Deepwater Asset Management Managing Partner Gene Munster said that investors may have to rethink the Tesla investment case, as Musk indicated that he was willing to sell vehicles at no profit and make money from autonomous software in the future. He called this approach a “razor-and-blade” business model and said that it could jeopardize Tesla’s long-term growth.
Tesla’s stock closed at $162.99 on Thursday, down 9.8% from its previous close. The stock is still up about 36% year-to-date, but down about 28% from its all-time high of $227.45 reached in January.
Despite the mixed opinions on Tesla’s margins and growth prospects, analysts generally agree that Tesla’s technological lead in EVs and autonomy remains a strong competitive advantage. The company’s future prospects may depend on whether it can sustain demand while keeping a lid on costs and improving margins.
