Teslano had a good time. The slowdown in China and the price cut of its electric cars hurt and two analysts decided to lowe their rating before the presentation of the results of the third quarter. However, its value is rising in the stock market according to Martin Baccardax of The Street.
These reductions come ahead of the presentation of third quarter results next week.
UBS analyst Joseph Spak lowered his price target on Tesla by $24 to $266 per share, less than a month after raising it. Jefferies analyst Philippe Houchois cut $15 from his price target, bringing it to $250 per share.
The moves follow weaker-than-expected September sales in China ahead of the Austin group’s third-quarter results update.
Houchois also cited shrinking profit margins and weak fundamentals that “raise questions about whether Tesla’s early profit advantage is a structural or temporary difference.” He added that some of the company’s other initiatives, including leasing fully autonomous driving technology, are not ready to offset the weakness in the overall business.
A test of Tesla’s strategy: profit market share
The China Passenger Car Association said on Sunday that Tesla sold more than 74,000 cars in the world’s biggest market last month. That’s a drop of 11% compared to the month last year and the figure of 84,159 recorded in August.
The slowdown in sales will test Tesla’s 2023 strategy, outlined earlier this year by CEO Elon Musk, which focuses on growing market share at the expense of revenue.
As part of that goal, Tesla has aggressively cut the prices of its flagship sedan, the Model 3, and its midsize SUV, the Model Y, in key markets around the world, including the United States and China. . This is an effort to attract new buyers and stem the growing competition in the electric vehicle space.
Tesla shares at last check were up 2% below $265. By 2023, by the end of trading on Monday, the stock had more than doubled, closing 2022 at $123.18.
Earlier this month, Tesla revealed plans to reduce the cost of the Model Y SUV as well as the Model 3 sedan by up to 4.2% for US customers. It has reduced the cost of its flagship, the Model 3, by about 17% since the start of the year, with a larger 26% cost reduction on the Model Y.
Falling income in sight
Tesla will release its third-quarter earnings after the close of business on Oct. 18. Analysts estimate its top line fell nearly 30% from a year earlier to 0.74 cents per share, though revenue rose about 12% to about $24.16 billion.
The difference is likely to be reflected in the group’s automotive margins, a key profit metric, which have declined sharply over the past 12 months following Tesla’s price-cutting strategy.
The cuts hurt Tesla’s profit margins, which were pegged at 18.7% for the three months ended in June, down from last year’s figure of 22.4%.
Demand is also being questioned, particularly in China, Tesla’s biggest market, after weaker-than-expected third-quarter deliveries of 435,059 new vehicles.
Analyst forecasts for deliveries ranged from 420,000 to 470,000, with Refinitiv setting a September quarter target of 459,000.
Tesla advanced Tuesday afternoon to $266.95. The 70-time moving average is below the candle on Tuesday, the RSI rose to 58 points and the MACD lines are just above the zero level.
Medium-term resistance is at $299.29. Meanwhile, the Ei indicators are mixed.