Tesla’s record Q4 deliveries may have come “at the cost of higher incentives, suggesting lower pricing and margin” said JPMorgan analyst Ryan Brinkman.
Tesla (TSLA) – Get Free Report shares moved lower Tuesday, following on from their worst annual performance on record, after softer-than-expected fourth quarter delivery figures and a price target cut from analysts at JPMorgan.
JPMorgan analyst Ryan Brinkman lowered his price target on Tesla by $25, to $125 per share, following his read on fourth quarter deliveries that indicated narrowing profit margins and potentially disappointing earnings later this month.
Tesla delivered a record 405,278 new cars over the three months ending in December, the company said in a statement on Monday, up 31.5% from the same period last year and 18.1% from the 343,000 tally reached over the three months ending in October. Deliveries for the full year were pegged at 1,313,851, a 40% increase from 2021 levels, well shy of CEO Elon Musk’s promise of 50% growth rates over the foreseeable future.
Analysts were originally looking for a total of around 450,000, but that estimate was reduced over the past month following reports of a week-long shutdown at the carmaker’s key gigafactory in Shanghai.
Brinkman, who kept his ‘overweight’ rating on Tesla stock in place, noted that price cuts in key markets, including the U.S., alongside extended sales incentives in China would likely compress fourth quarter margins and moderate near-term production and delivery estimates.
Tesla will publish its fourth quarter earnings on January 25, with forecasts pointing to an adjusted bottom line of $1.20 per share on revenues of $25.1 billion. It will also host an Investor Day on March 1.
Tesla shares were marked 5% lower in pre-market trading to indicate an opening bell price of $117.00 each. For the 2022 year, the stock fell nearly 70%, its worst decline on record, and lost more than $706 million in market value.
Short interest in Tesla shares remains elevated, as well, with bets around the group pegged at around $12.4 billion, according to recent data from S3 Partners, a figure that represents around 2.72% of the group’s outstanding shares.
Last week, Morgan Stanley analyst Adam Jonas reiterated his ‘overweight’ rating on Tesla stock, but slashed $80 from his price target to a new level of $250 per share.
Jonas noted the group “may be in position to extend its lead vs. the EV competition (next year) even before consideration of Inflation Reduction Act benefits where Tesla also stands out as the biggest potential winner.
Portions of the IRA will allow buyers of Tesla Model 3 and Model Y sedans to reclaim a portion of their purchase price, up to $7,500 dollars, in federal tax credits.
“Within this environment, we believe players that are self-funded, with demonstrated scale and cost leadership throughout the value chain can be relative winners,” Jonas said.
The outlook echoes a similar bullish thesis from Baird analyst Ben Kallo, who lowered his price target on Tesla shares by around 11.5%, to $252 per share, but noted the company remains one of its “best ideas” for 2023 and held on to its ‘outperform’ rating.
Kallo said Tesla has ““many demand levers to pull including an increase in vehicle leasing and additional supercharging incentives” that could offset weakness in China, where a weeklong shutdown in production at its Shanghai factory rattled investors.