In a new analysis from brokerage Bernstein, analyst Toni Sacconaghi writes that Tesla is the best short candidate in 2024. He cuts the price target to $150 per share. share and recommends selling.
Sacconaghi writes that the financial year 2023 was particularly challenging for Tesla, where the company received an earnings per share (EPS) which was 50 per cent below estimates for the year. The share doubled despite this, he points out.
He further argues that the estimates are too high. Sacconaghi estimates an earnings per share of $2.59 in 2024, which contrasts with the consensus estimate of $3.34.
“We expect delivery and revenue estimates for 2024 and 2025 to fall significantly. While significant downward EPS revisions had no impact on the price this year, we believe a more negative narrative could contribute to multiple contraction next year,” it said.
Bernstein expects that the Cybertruck will serve a niche market and that it could potentially reduce the gross margin of the car segment next year. Besides that, it doesn’t expect the company to launch new high-volume products until 2026.
Falling gross margin
Bernstein noted that to achieve annual growth of approximately 485,000 units in 2023, Tesla reduced prices by 16 percent. Gross margin fell 7.5 percentage points in the segment after the price adjustment, which Bernstein believes will continue into 2024.
“To stimulate demand, Tesla had to dramatically cut prices in 2023, and we believe they will have to do so next year as well,” the note says.
Current estimates, on the other hand, predict that Tesla will increase its sales by over 400,000 units next year, while keeping prices relatively stable and increasing its gross margin by up to 2 percentage points.
“Given the difference between Tesla’s financial performance versus price performance in 2023, investors may ask why now and what will be different in 2024? We believe that Tesla’s valuation has been supported by growth expectations, even as margins have eroded,” he concludes.
2023-12-09 15:54:29
#Thinks #Tesla #short #candidate
