Wall Street revised its Tesla stock target prices late Wednesday and early Thursday after the global EV giant reported worse-than-expected third-quarter earnings. Chief Executive Elon Musk preached caution, offering investors warnings. Tesla stock sank Thursday.
A slew of analysts lowered TSLA price targets after Q3 earnings as questions swirled around the company's near-term strategy and whether a growth stock works if its EPS is not jumping in 2024. Tesla stock has surged in 2023 as investors bet that the EV maker's growth story was intact, despite near-term growth woes.
Late Wednesday, Tesla reported third-quarter earnings fell 37% to 66 cents per share, the lowest in two years for CEO Musk. Meanwhile, quarterly revenue increased 9% to $23.35 billion. Tesla's auto gross profit margins, excluding regulatory credits, fell to 16.3%.
Tesla did announce that initial Cybertruck deliveries will begin on Nov. 30, but Musk tempered expectations telling investors it will take 12-18 months before the new vehicle is a "significant positive cash flow contributor."
Tesla Earnings Slide 37%; Cybertruck Coming But Elon Musk Issues This Warning
Bank of America, Canaccord and Goldman Sachs were among the firms that cut Tesla stock price targets early Thursday on Q3 earnings.
Tesla stock fell 9.3% to 220.10 Thursday during market action. On Wednesday, TSLA dropped 4.8% to 242.68.
Wedbush analyst Dan Ives, a longtime Tesla bull, wrote Thursday that the earnings call was a "mini disaster" as Musk charted a cautious tack, warning Cybertruck production will take time and that he is concerned with the current economy.
Ives lowered his price target on Tesla stock to 310, from 350, noting there are near-term challenges around profit margins and volumes.
Tesla Growth In Question
Meanwhile, Bernstein sees Tesla looking increasingly like a "regular auto company," based on the EV giant's Q3 balance sheet. The firm wrote Thursday that Tesla appears cautious on its near-to-medium growth prospects, indicating that it was "reviewing all options" for 2024. Bernstein believes TSLA may have to guide deliveries below consensus and face lower-than-expected margins in 2024.
Morgan Stanley analyst Adam Jonas also weighed in on Thursday. Last month Jonas wrote a bullish note on Tesla's full-self driving supercomputer. However, on Thursday Jonas took time to answer "how can we defend a 'growth' stock that appears ready to enter its 2nd consecutive year of earnings decline."
Morgan Stanley has an overweight rating and lowered his price target to 380, down from 400, on TSLA.
Jonas, in his research note, writes that Morgan Stanley views Tesla as much more than an auto company and is betting on Tesla's network services, mobility, third-party battery and full-self driving licensing along with its energy and insurance businesses.
"Our OW (overweight) thesis is highly dependent upon these business lines becoming far greater drivers of earnings with clear milestones/proof-points backed by accompanying financial disclosure," Jonas wrote.
Jonas predicts Tesla 2024 EPS will be $2.41, down from the previous view of $3.89. Wall Street consensus has Tesla 2024 earnings at $4.24 per share, according to FactSet.
Tesla Stock Performance
Tesla stock is retreating below a 278.98 buy point in a cup-with-handle base, according to MarketSmith. Shares cut below their 50-day moving average in moderate volume on Wednesday. On Thursday, TSLA fell below 227, beyond the 12% maximum depth for a valid handle.
Meanwhile, analysts maintain that the United Auto Workers strike against Ford, General Motors and Stellantis is good news for Tesla, a nonunion shop.
Tesla stock ranks fourth in the 35-stock IBD automaker industry group. The S&P 500 component has a 96 Composite Rating out of a best-possible 99. Tesla stock also has a 93 Relative Strength Rating and a 90 EPS Rating.
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