Fast Facts
- Wedbush's Dan Ives lowered his Tesla price target on expectations of soft first-quarter-delivery numbers.
- Ives said that the Tesla story is "as negative" as it's ever been, but this time that negativity is "warranted."
- Tesla is set to report first-quarter earnings April 17.
Wedbush's Dan Ives expects Tesla (TSLA) to report its first-quarter-delivery numbers April 2, and he doesn't expect the report to be a positive one.
Ives said in a client note that the first quarter had been a "nightmare" quarter for Tesla, with supply issues crossing with soft demand in China to result in a "perfect storm" that has pushed sales down.
Delivery estimates for the quarter have dipped to 425,000 from 475,000; Ives said that Tesla would no longer be able to meet a baseline of 2.1 million units for the year, and he's now expecting a baseline of 2 million. The company delivered 1.8 million units in 2023.
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Wedbush lowered its Tesla price target to $300 from $315, though Ives maintained his outperform rating.
The biggest challenge Tesla is currently facing, according to Ives, has to do with rising electric vehicle competition in China.
And EV competition from Chinese automakers is rising in markets beyond China itself. A recent paper from the European Federation for Transport and Environment found that 19.5% of all EVs sold across the European Union last year were built in China.
While 28% of those were imported by Tesla, the report found that Chinese automakers are "quickly catching up," making up around 8% of the EU's EV market in 2023, compared to a 0.4% share in 2019.
The European transport federation projected that Chinese automakers would be able to reach 20% of the electric-car market by 2027.
"We believe the Tesla narrative is as negative (as) we have seen in the last few years," Ives said. "But unlike other times, now it's warranted as growth has been sluggish and margins showing compression with China a nightmare."
Musk more than a year ago started an EV price war and about a year ago said that Tesla would emphasize selling cars and building market share over profitability.
Ives: Tesla Q1 a 'rip the Band-Aid quarter'
Ives called the current moment a "fork in the road" for Musk to guide Tesla through a turbulent period — or lead the company into "darker days."
Ives listed five steps he said Musk should take to stanch the bleeding and turn the proverbial car around.
- He called for Musk to first give formal guidance for margins and deliveries in 2024.
- He called on Musk to directly address the demand issues in China, complete with a strategy to reverse the trend, during Tesla's first-quarter-earnings call.
- Tesla should have a "battery/AI day" to give investors an idea of the road to monetization, Ives said.
- Musk should "commit to being CEO of Tesla" for the next three to five years, including its work in AI.
- Echoing other investors, Ives said that Tesla should "start a real advertising campaign."
Though Ives said he remained bullish on the stock and confident of Tesla's dominance of the EV market, he said the release of Tesla's first-quarter numbers will "not be a moment of celebration for the bulls and instead be a rip the Band-Aid quarter for Tesla investors."
The average price target for Tesla, according to TipRanks, is $207.
The stock, down 27% for the year, closed Wednesday at $179.83.
Contact Ian with tips and AI stories via email, ian.krietzberg@thearenagroup.net, or Signal 732-804-1223.
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