Deutsche Bank trims Tesla price target, cites risks to the electric vehicle maker's prospects going forward

Published Wed, Sep 27 20238:09 AM EDTUpdated Wed, Sep 27 202310:39 AM EDT

In addition to a third-quarter miss, Deutsche Bank sees "meaningful downside risk" to Tesla 's 2024 consensus expectations due to limited volume growth next year. Analyst Emmanuel Rosner cut his price target on the stock by $15 to $285, which suggests shares can gain 16.7% from Tuesday's closing price. He maintained his buy rating, however. "We see near term risk from weaker fundamentals into 2024," Rosner said in a Tuesday note. This is "due to much lower volume outlook than the market believes." "Amid next year's particularly muted volume growth (just 300k units, or only 17% YoY) but potentially less pricing pressure, we bake in a moderate ~1% price decline y/y, given the higher Model 3 price mix which should start in 4Q23 in China and potentially roll out to the U.S. as well," the analyst added. Tesla shares have had a banner year, nearly doubling in that time. Despite its stock price boom, Rosner isn't too confident about Tesla's prospects going forward. The analyst lowered his third-quarter revenue forecast to $23.3 billion on lower volume expectations, down from $24.1 billion. He also reduced delivery expectations to 440,000 units, compared to the previous 455,000 for the period. These updated expectations reflect weeks of downtime at several Tesla plants during the summer, price cuts to Model Y cars in China, Model S/X and targeted inventory discounts, as well as "limited positive offsets," Rosner said. He noted that with the refreshed China-made Model 3 launching in China earlier this month, old Model 3 vehicles in the region have already started to decline, suggesting "limited benefit" from the newer model for the third quarter. "We think investors may not have fully appreciated the impact it may have on deliveries for the quarter at the time" of the company's commentary from second-quarter earnings this year, Rosner said. He increased his earnings per share estimates for 2025 on the basis that Tesla launches its next-generation vehicle on time for its planned launch that year. Barclays on Friday similarly lowered its third-quarter production and delivery expectations for Tesla, saying the numbers will be under pressure before recovering in the final three months of 2023. Tesla is expected to report earnings Oct. 18. — CNBC's Michael Bloom contributed to this report.