Tesla Inc. TSLA could be in for a challenging year, according to a Wells Fargo analyst, who predicts a 13% growth in deliveries, a figure that falls short of the company’s long-term target of 50%.
What Happened: MarketWatch reported on Wednesday that Colin Langan, an analyst at Wells Fargo, has warned that the Elon Musk-led company might face a tumultuous year due to various factors, including a slowdown in global electric vehicle (EV) adoption.
The company has already experienced a rocky start to the year, with price reductions in China and a production halt in Germany. These issues, combined with macroeconomic headwinds such as high interest rates and flattening EV adoption, could spell trouble for Tesla.
Langan also expressed concerns about Tesla’s automotive earnings for the latest quarter, stating that the company is at the highest risk. He predicts that the impact of price cuts will outweigh the effect of increased volumes in the latest quarter.
When Tesla releases its earnings next week, the focus will be on its profit outlook. Langan estimates a 15.4% gross margin for the period, which is below the 17% consensus view on VisibleAlpha. He also expects that higher leasing rates in the U.S. could affect profits, as leased vehicles qualify for IRA 45W credits.
Due to these factors, Langan has reduced his price target for Tesla’s stock to $223 from $250, reflecting his expectations for lower long-term growth.
Why It Matters: Tesla’s potential challenges in 2024 come at a time when its position in the global EV market is being challenged. Chinese automaker BYD Co Ltd BYDDF backed by Warren Buffett, has surpassed Tesla in global EV sales and announced plans to invest over $14 billion in advancing vehicle intelligence and EV evolution.
Moreover, Tesla has recently lost its title as the most-shorted stock, slipping to the third position. This shift in the market dynamics could further impact Tesla’s performance in the coming year.
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