Jefferies reiterated a Hold rating on Tesla (NASDAQ:TSLA) and cut their 12-month price target on the automaker’s stock to $185.00 (From: $225.00) following the company’s 4Q earnings release.
Tesla’s 4Q results were as expected, with lower COGS. While slower growth was predicted, avoiding a set volume target could help bring back dynamic pricing.
However, there was concern with a lack of a clear strategy for addressing gaps in the business model, which mainly focuses on selling new cars without covering lifecycle aspects like maintenance, customer acquisition, and used car values.
“The disappointment in last week's disclosure was not the obvious ‘notably lower growth’ but the lack of vision or plan to use the growth hiatus to address gaps in the business models.” Wrote Jefferies analysts in a note.
A period of slower growth could address these gaps, particularly considering the development of Full Self-Driving (FSD), Dojo, and Optimus, which necessitate robust automotive cash flows for funding.
Jefferies adjusted their 2024/25 volume forecast to 2.03/2.37 million units, with +12/17% growth. This considers Cybertruck sales and more units from Models 3/Y due to market growth and improvements. Gross margins stabilized at around 16%, balancing slow growth with higher depreciation.
EBIT margins are estimated at 8.5-9.0%, including benefits from competitors' slower EV ramps. The impact of ramping up 4680/Dry is uncertain until 2025. Jefferies hasn't factored in earnings from FSD and other ventures yet.
For 2024/25, they project Adjusted EPS at $3.2 and $3.8, with FCF at $6.6 billion, considering capex exceeding $10 billion.
Shares of TSLA are up 0.93% in pre-market trading Monday morning.