Tesla Analyst Slashes Price Target By Over 12% To Reflect Macro Headwinds

  • Mizuho analyst Vijay Rakesh maintained Tesla Inc TSLA with a Buy rating but lowered the price target from $285 to $250.
  • TSLA reported December quarter deliveries of 405.3k vehicles (below consensus 418.0k) though mostly expected with the week-long Shanghai shutdown. 
  •  For the full-year 2022, total deliveries were 1.31M units, up 40% Y/Y, while overall production was up ~47% Y/Y, in line with previous TSLA commentary. 
  • TSLA noted an increase in cars in transport exiting the December quarter. 
  • However, Rakesh believes concerns remain around a weakening consumer driven by rising interest rates and broader macro concerns, which could continue to be a 1H23E headwind. 
  • The analyst also noted a critical one-week shutdown at the Shanghai factory (45%+ of TSLA annual capacity)
  • Rakesh believes the December quarter top line could see challenges, with price cuts in both China (~9-10%) starting in October and the U.S., with ~$7,500 discounts on the Model 3/Y in the month of December. 
  • However, introducing the Inflation Reduction Act with certain Model 3/Y's now qualifying for the $7,500 credit could create a significant tailwind, the analyst noted. 
  • In addition, TSLA is beginning to ramp the Semi, with deliveries starting in December, though Rakesh believes volumes are currently low, while the Cybertruck is likely for a mid-2023 production start.
  • Competition in China, the world's largest BEV market, is increasing as BYD Co, Ltd BYDDY and Geely Automobile Holdings Ltd GELYF ramp up new EVs at an attractive price point. 
  • In the U.S., new EV models like the Silverado EV and the continued popularity of the Ioniq 5 EV could also add to competition concerns. 
  • Overall, 2022 EVs were up 65% Y/Y (vs. broader LVP, up ~6% Y/Y).
  • Price Action: TSLA shares traded lower by 2.71% at $110.56 on the last check Thursday.
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