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Tesla shares jumped in Monday morning trading ahead of highly anticipated second-quarter delivery figures, even as one major Wall Street analyst suggested the stock has more room to move lower after a rocky start to the year.
Tesla (Tesla) Toyota, which is facing a sharp drop in global demand for electric vehicles, increased competition from rivals in China and narrowing profit margins linked to a series of price cuts, will release second-quarter delivery figures on Tuesday, July 2.
The group warned earlier this year that total deliveries in 2024 would be “significantly lower” than in 2023. Last month, Tesla dropped a reference to its goal of delivering 20 million vehicles each year by 2030.
The broader shift in strategy, which CEO Elon Musk has called “stunningly obvious,” could see the automaker focus on developing a fleet of self-driving robot taxis, leveraging the power of its supercomputer and artificial intelligence, over its roots in the traditional auto industry.
However, Wells Fargo added the stock to its tactical ideas list on Monday, confirming the downgrade from analyst Colin Langan, as the investment firm braces for another disappointing quarter in terms of overall deliveries.
“Price cuts and financing offers have shown diminishing returns on volume,” Wells Fargo analysts said in a note published Monday, cutting their total 2024 deliveries to about 1.55 million units.[an about] A decrease of 14% year-on-year, and [about] 13% below Wall Street consensus.
Wells Fargo is seeing more demand and margin pressures
“The decline in deliveries and price cuts would lead to a decline in profits by about 44% year-on-year in 2024. Concerns remain about demand for the Model 2 and the margin profile of a smaller, more widespread vehicle,” the bank added.
Langan kept Tesla’s $120 price target in place as well. The stock’s position on the list was described as a bearish idea.
Tesla’s second-quarter deliveries are unlikely to ease these concerns either, with LSEG data indicating a total of 438,019 units, a 6% decline from the same period a year earlier.
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This would also mark the first time ever that Tesla has recorded two consecutive quarters of declining deliveries. The trend could continue in the second half as Musk focuses on a robotaxi launch event in August and his long-term ambitions to turn Tesla into a market leader in artificial intelligence.
Musk said the group could launch a range of new cars later this year or early 2025, though he noted that Tesla would likely use existing production facilities “as well as aspects of its next-generation platform.”
This will likely mean that Tesla will not be able to launch the low-priced electric car that investors had hoped for, putting further pressure on the group’s profit margins.
However, Musk also told investors in April: “I think we will have higher sales this year than last year.”
Tesla’s sales in China have been hurt by competition
However, China sales have also been in decline, with data from the Passenger Car Association indicating that April and May numbers were about 12.2% below the levels expected in 2023. This is thanks to increased competition from rivals such as Nio. (New) BYD, which is backed by Warren Buffett. (will)
However, Wedbush analyst Dan Ives believes a “mini-rebound” in June could help Tesla’s overall China tally and bring the group’s overall Q2 delivery total “close to [Wall Street’s] “Estimate 435,000 units.”
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But Ives, who maintained an outperform rating and $275 price target in a note published Friday, is focused on Tesla’s transition story as it chases delivery targets in the flagging electric vehicle market.
“We still believe Tesla is more of a company focused on artificial intelligence and robotics than a traditional car company,” Ives said, adding that market interest is expected to shift strongly toward the robotaxis scheduled to be unveiled on August 8.
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“Although next week’s delivery numbers are very important, [Wall Street] “I’m starting to focus on Tesla’s next growth engine that’s taking shape now, with the worst of the demand slump in the rearview mirror… heading into the second half,” Ives said.
“Ultimately, the key to achieving a $1 trillion-plus valuation is independence and… [Full-Self-Driving] He added, “The vision is taking hold at Tesla, which seems to be turning in the right direction with the latest version of FSD v12.4 and is now conducting FSD tests in China.”
Tesla shares rose 1.8% in premarket trading to an opening price of $201.42, a move that would leave the stock down about 20% for the year.
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