Tesla Catches Analysts Off Guard With 'Kitchen Sink' Q1: Why This Fund Manager Says It's 'Hard To Be Bullish' On EV Giant's Stock

Tesla Motors, Inc. -2.71%

Tesla Motors, Inc.

TSLA

157.11

-2.71%

Tesla, Inc.'s (NASDAQ:TSLA) subpar first-quarter deliveries number triggered negative reactions from most analysts, although some still see light at the end of the tunnel.

Caught Off Guard: Deepwater Asset Management's Gene Munster said Tesla's first-quarter sales caught him off guard, as he was bracing for flattish sales year-over-year. The company reported an 8.5% year-over-year sales decline and a 20% sequential plunge.

The tech analyst said deliveries for the year could fall by 3% for 2024 if the company manages to report 10% sequential growth for the year, as opposed to the 15% growth the Street was modeling. “So this is probably more ugly than it seems even today,” he said in a CNBC interview. The changed outlook isn’t factored in the stock, he added.

Munster sees the stock going down further but not down to $100 as some called out, as “this is going to be…kind of kitchen sink.”

The venture capitalist, however, is positive about the bigger picture. Electric vehicles are a $2.5 trillion market. “I think eventually they [Tesla] will get to the other side,” he said. He also sees full self-driving software, likely fructifying in the next two years, as another catalyst.

Also, by mid-2025, comparisons become easier and this will start getting reflected in the stock, probably in mid- to late-2024, Munster said.

In a post on X, formerly Twitter, he said, “While EVs are in the dumpster, the pendulum will swing back in favor of the theme and $TSLA because electrification and autonomy are the future and Tesla is the leader.” The storm the company is currently facing will pass as it makes the right decisions for the long run, he added.

CANACCORD Maintains Positive Stance: Despite the weak numbers, CANACCORD Genuity analyst George Gianarikas maintained a Buy rating and a $234 price target for the stock. The issues of the first quarter were somewhat demand-related but mostly supply-related, according to the analyst, excerpts of his note shared by Tesla influencer Sawyer Merritt on X showed.

“If Cybertruck were fully ramped at ~62.5k units a quarter of production, the story of the quarter would have been much different,” Gianarikas said. He estimated the company may have delivered 3,500 units of the electric pickup truck during the quarter.

While reconciling the difference between first-quarter production and deliveries, the analyst said it could most likely be due to supply issues. The company could have finally started to ramp up production of the new Model 3 in Fremont, Cybertruck in Austin, and Model Y in Berlin in the last weeks of the quarter, he said, adding that it may not have been able to deliver these vehicles in time due to the late-quarter ramp-up.

“Clearly, demand has not been stellar since the start of the year. But, again, if the company were clear of supply issues and were able to sell as many updated Model 3s as it could in the US and Cybertrucks globally, we think the quarter would have looked much, much different,” he added.

Black Flags Inventory Bloating: Future Fund’s Gary Black said Tesla analysts will likely reduce their 2024 adjusted earnings per share estimate from $2.93 to $2.70 and that for 2025 from $3.93 to $3.60. “There's no way to sugarcoat 1Q deliveries as anything but negative,” he said.

The fund manager noted that Model Y inventories were at an all-time high and finished good inventories were at 29 days of inventory outstanding compared to 15 in the fourth quarter. This is the highest since the first quarter of 2019, he added.

Tonight I expect $TSLA analysts to reduce FY'24 adj EPS to ~$2.70 (from $2.93) and FY'25 adj EPS to ~$3.60 (from $3.93). There's no way to sugarcoat 1Q deliveries as anything but negative. M-Y inventories are at an ATH and TSLA FG inventories are now at 29 DIO vs 15 in 4Q. pic.twitter.com/2wRt33SPg6

— Gary Black (@garyblack00) April 2, 2024

“Absent a $25-$30K EV until early 2026 to fight the plethora of $25K-$30K competing EVs and a nascent TSLA advertising strategy, it's hard to be bullish,” Black said. Price cuts for Model 3 Highland will not make sense as their inventory levels are now, he said.

Black, however, sees promise in FSD. “FSD v12.3.3 is a nice add-on that can sell more Teslas, but not at $12K or $199/month,” he said. The most appropriate sales strategy, according to the fund manager, could be expanded communications to ICE users to convince them to go EV.

“But fundamentals (volume and EPS revisions) remain very negative, which will likely keep the stock in the $150-$180 range, huge FSD advances notwithstanding,” he added.

Johnson Sees US As Sore Spot: Bearish analyst Gordon Johnson of GLJ Research differed with fund manager Ross Gerber and said the first-quarter predicament is not an Elon Musk issue, a logistics issue, or a factory issue. “People just don’t want their cars,” he said.

Tesla produced 433,000 cars and sold merely 387,000 of those, which suggests that inventory grew 42% sequentially to 46,600 cars, Johnson said. This is a $20.3 billion drain to cash in the first quarter alone, he said.

Johnson also said the demand issue is more pronounced in the U.S. “We know what China and (pretty much) the EU numbers were. The big miss, thus, came in the US,” he said.

Tesla ended Tuesday’s session down 4.90% at $166.63 and fell an incremental 1.03% to $164.93, according to Benzinga Pro data.

Image via Shutterstock

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