Tesla Will Have A 'Knockdown' 2023, But This Vehicle Alone Has Potential To Restart Delivery Growth: Analyst

Zinger Key Points
  • Rising interest rates and a pull-forward of demand are responsible for Tesla's demand problems, says Gene Munster.
  • The analyst says earnings could be in for a 25% drop in the March quarter.

Even as shares of Tesla, Inc TSLA continued to plunge last week, a fund manager on Friday reaffirmed his confidence in the electric vehicle maker.

What Future Holds For Tesla: The year 2023 will be "a knockdown," a reset year from the perspective of growth and profits, Loup Funds’ Gene Munster said. He sees stability returning in 2024.

“One thing has not changed, my belief in the company’s long-term potential,” Munster said. Tesla, the venture capitalist said, will be a winner, noting that even amid the company’s tough times during the past three months, there wasn’t a competitor outside of China that gained traction with notable sales or with a new factory comparable to Tesla.

Traditional OEMs weren’t advancing autonomy at Tesla’s pace, he added.

The recent delivery miss and expected gross margin shortfall are a year-long headwind, Munster said. Cybertruck will begin production later this year and ramp into 2024, he said.

“That vehicle alone has the potential to restart overall Tesla delivery growth next year,” he added.

Additionally, Munster said the big picture hasn’t changed, with EV penetration increasing from 5% currently, to 100% in the next 20 years. “Tesla still offers the best value in an EV and no other carmaker has optionality around storage, solar and robotics,” he said.

The venture capitalist expects Tesla to talk more about its third-generation platform, a codename for what is widely known as the Model 2 vehicle, and its robotaxi initiative. He expects Musk to discuss these projects at the Tesla Investor Day scheduled for March 1.

See also: Best Electric Vehicle Stocks

Present Tense: Munster, however, sees the near term as posing a risk on three fronts.

1. Slowing Growth: Munster noted that despite the 7% price discount, Tesla’s year-over-year sales growth slowed from 68% in the March quarter to 31% in the December quarter. Rising interest rates and a pull-forward of demand, as reflected by the frenzied buying by early adopters over the past two years, may have led to the demand softness, he said.


2. Discounting: As demand slows, the company may have to keep discounting to gain market share, but this would come at the expense of future profits, Munster said.

3. Lower Margins: A 13% price cut recently announced in China points to a 15% hit to overall profits, the Loup Fund’s co-founder said. If the discounting spreads to other countries, the negative impact on margins will expand, he said. Investors, according to Munster, are bracing for a 25% earnings drop in the March quarter.

Tesla closed Friday’s session at $113.06, up 2.47%, according to Benzinga Pro data.

Read next: Did Tesla's Price Cuts In China Backfire? Here's How Customers Reacted To Announcement

Photo: courtesy of Shutterstock.

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