Guggenheim downgrades Tesla to sell, says fourth-quarter estimates are overly optimistic
Guggenheim thinks Tesla’s expectations for the fourth quarter are too high — and the stock could struggle as a result. Analyst Ronald Yesikov downgraded the stock to sell from neutral over concerns about the electric vehicle maker’s fourth-quarter estimates. He set a target price of $89, down 28% from Thursday’s close. Yevsikov said he expects Tesla to miss gross margin expectations in the fourth quarter due to price cuts and other stimulus. He added that full-year 2023 expectations would need to be reset. The analyst also noted that while the price of a Tesla has fallen three times faster than the market over the past three months, key demand indicators remain weak. Yevsikov pointed to more price cuts this week, which are seen as negative for device makers and the prize pool. “Overall, against the backdrop of a challenging FY23 environment, we believe TSLA had to decide whether to sacrifice volume growth or gross margin, and based on pricing actions, the answer appears to be gross margin,” Yevsikov said in a note to clients . “This creates a difficult narrative for a stock that still trades at ~30 times our FY23 estimates, which we now project will grow at only about 10% CAGR over the next 3 years.” Tesla slipped 5% in premarket trading. The stock lost 65% in 2022 as the electric-vehicle maker first began turning to price cuts to spur demand and CEO Elon Musk completed a messy buy of Twitter. Yesikov isn’t the only Wall Street analyst turning bearish. Citi analyst Itay Michaeli maintained a hold rating on the stock but lowered its price target to $140 from $176. Its new price target implies that the stock is up 13.3% from Thursday’s close, versus the 42.4% previously expected. Michaeli said vehicle deliveries in 2023 will rise 40% in 2023, a slowdown from a year-ago growth rate of 53%. Auto gross margin growth will come in at about 27.5% in 2022, before slowing slightly to 27.3% in 2023. Its earnings per share estimates for the fourth quarter of 2022 are slightly above the Wall Street consensus. However, its full-year 2023 estimate is 6% below the Street consensus, consistent with its below-expected delivery forecast. The lowered 2023 estimates, in turn, pushed longer-term estimates for Tesla lower, Michaeli said. But he said his valuation reflects the potential for the electric vehicle maker to improve its position in a downturn. Meanwhile, Wells Fargo analyst Colin Langan cut his target on the stock by $100 to $130, noting that slowing growth could see the stock lose its tech-driven valuation. – CNBC’s Michael Bloom contributed to this report.
https://www.cnbc.com/2023/01/13/guggenheim-downgrades-tesla-to-sell-says-fourth-quarter-estimates-are-too-optimistic.html Guggenheim downgrades Tesla to sell, says fourth-quarter estimates are overly optimistic
