On Tuesday, Goldman Sachs (NYSE:GS) sustained its Neutral rating on Tesla (NASDAQ:TSLA) shares, with a consistent price target of $190.00. The firm's stance comes in light of Tesla's first-quarter deliveries, which fell short of Goldman Sachs' revised expectations. The investment bank had previously adjusted its forecast for Tesla's first-quarter deliveries down to 435,000 vehicles from 475,000 due to weak monthly data points, yet actual deliveries were even lower than this reduced estimate.
The shortfall in deliveries has led Goldman Sachs to revise its outlook on Tesla's 2024 delivery numbers, which are now expected to be below the previously forecasted 1.98 million units. This adjustment reflects concerns about increased market and competitive pressures that were not previously anticipated. Despite this, Tesla's upcoming initiatives, such as the launch of the Cybertruck, a new Model 3, and a potential refresh of the Model Y, could positively impact volume growth in the future.
Tesla's pricing strategy is also under scrutiny, especially after the company increased prices for its Model Y in key markets on April 1st. This move follows a period of significant price reductions over the past year.
Goldman Sachs highlights the ongoing debate on whether Tesla will maintain a disciplined approach to pricing, which could be crucial for sustaining profits, particularly in the U.S. where the Model 3 and Model Y are competitively priced with federal tax credits. Conversely, the competitive landscape in China may necessitate a more aggressive pricing strategy.
Another focal point is Tesla's advancements in full self-driving (FSD) technology. Goldman Sachs acknowledges Tesla as a frontrunner in AI and software technology within the automotive sector. The latest version of Tesla's FSD, which utilizes neural networks, is expected to accelerate the development of self-driving capabilities and potentially increase software revenue. However, the firm anticipates that it will take more time for Tesla to achieve a Level 3 version of FSD, which allows for conditional automation.
Lastly, Tesla's growth in other business segments, such as Services and Energy, was noted. The company achieved a record level of storage capacity deliveries in the first quarter of 2024, signaling potential growth opportunities beyond vehicle sales.
InvestingPro Insights
Goldman Sachs' neutral outlook on Tesla is echoed by some cautionary signals from InvestingPro. While Tesla holds more cash than debt, a strong indicator of financial health, analysts have revised their earnings downwards for the upcoming period, hinting at potential headwinds. Additionally, Tesla's stock is trading at a high earnings multiple, which could suggest that the stock is priced optimistically relative to near-term earnings growth.
From a data perspective, Tesla's market capitalization stands at a robust $529.34 billion, and the revenue for the last twelve months as of Q4 2023 was $96.77 billion, showing a healthy growth rate of 18.8%. However, the gross profit margin in the same period was 18.25%, which may raise concerns about profitability, especially when paired with the competitive pressures mentioned by Goldman Sachs.
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