Tesla's first-quarter delivery volume is about to be announced, with analysts starting to successively lower delivery expectations. Weak demand in the Chinese market will make the first quarter a "nightmare"
The market's enthusiasm for Tesla is gradually cooling down, with weak demand in the Chinese market causing Wall Street to worry about its first-quarter deliveries.
According to FactSet data, Tesla delivered 457,000 vehicles in the first quarter, compared to 423,000 vehicles in the first quarter of 2023 and 484,000 vehicles in the fourth quarter of 2023. Market expectations at the end of January were for first-quarter deliveries to reach 494,000 vehicles.
On March 28, Wedbush analyst Dan Ives, who has long been bullish on Tesla, stated that Tesla is currently in a "tight period." The first-quarter delivery numbers will be announced in the coming days, and this quarter may become a nightmare for Tesla due to weak demand in the Chinese market. He lowered the target price from $315 to $300:
Despite Tesla's continued dominance in the electric vehicle market, a series of recent demand issues have significantly lowered its first-quarter delivery expectations. While unexpected events such as the fire at the Berlin factory have affected supply, the bigger issue lies in the weak demand in the Chinese market.
Dan Ives expects Tesla's delivery data to be announced next Tuesday, with deliveries in China this quarter expected to decline by 3%-4% compared to the same period last year. "This will not be a time for bulls to celebrate, but a quarter for Tesla investors to heal."
Meanwhile, Deutsche Bank analyst Emmanuel Rosner also lowered his delivery expectations for Tesla due to similar concerns, reducing the first-quarter delivery forecast from 427,000 vehicles to 414,000 vehicles. Rosner believes that Tesla's price reduction strategy in China and Europe may boost sales in the short term, but will exert sustained pressure on profit margins and earnings in the long run:
Although Tesla has announced price increases in the U.S. and China starting in April, we believe this is to boost March sales rather than a sign of strong demand. We have lowered our full-year delivery expectations for 2024 to around 1.9 million vehicles, below the general expectation of around 2.06 million vehicles.
Morgan Stanley lowered its forecast for Tesla's Q1 deliveries from 469,400 vehicles to 425,000 vehicles, and the full-year delivery expectation from 1.998 million vehicles to 1.954 million vehicles.
Citi also lowered its first-quarter delivery forecast for Tesla in its latest report, from the previous 473,000 vehicles to 429,000 vehicles, representing a year-on-year increase of only 2%. It is expected that 160,000 vehicles will be delivered in the U.S. and 132,000 vehicles in China, while the European market will see deliveries of 92,000 vehicles.
Citi analyst Itay Michaeli pointed out that market expectations for Tesla's first-quarter deliveries are still high. Buyers now expect Tesla's first-quarter deliveries to be significantly lower than the sellers' estimates of 460,000 to 470,000 vehicles, posing a challenge to Tesla's stock price and overly optimistic forecasts for next year.
Throughout March, several investment banks have lowered Tesla's target price, including Morgan Stanley, Deutsche Bank, Fidelity, UBS, and Goldman Sachs. Among them, Fidelity's target price is as low as $120, implying a further decline of around 30%Analysts at Fuguo Bank believe that the core issue facing Tesla is that its once strong growth capability has waned, with multiple price cuts to stimulate demand yielding little results. Revenue and profit growth have significantly slowed down, yet its valuation remains significantly higher than other large growth stocks.
Dan Ives stated that market expectations related to Tesla are unusually negative, and this time the alarm raised against Musk and Tesla is reasonable, as growth has been slow and profit margins have been squeezed:
For Musk, this is a critical moment to steer Tesla through this turbulent period, otherwise darker days may lie ahead. How this period is navigated will determine Tesla's future.
Dan Ives still sees potential in Tesla's FSD technology, which is a key pillar of disruptive technology. However, investors' patience is wearing thin, especially as Musk often talks about developing AI beyond Tesla.
Therefore, in order to reverse the current situation, Dan Ives suggests that Musk needs to set a clear target range for profit margins and delivery volumes in 2024, address the issue of weak demand in the Chinese market, and hold a Battery/AI Technology Day to comprehensively outline the company's technological roadmap to investors.
In overnight trading, Tesla fell over 2%, accumulating a decline of over 12% this month and over 29% year-to-date. Over the past 12 months, the decline has reached 9%, while the S&P 500 index has risen by over 30% during the same period.
