Image Source: Pexels

Tesla (TSLA) is expected to report results on its fiscal fourth quarter on Wednesday, January 24, with a conference call scheduled for 5:30 pm EDT. What to watch for:

SELL TESLA: On Wednesday, Redburn Atlantic initiated coverage of Tesla with a Sell rating and $170 price target as the firm launched coverage of nine automotive original equipment manufacturers, with a "cautious bias" driven by falling incremental returns. Margins face fading support, which had been provided by a resilient consumer and vehicle undersupply. Redburn expects the winners to iterate best-in-class electric vehicle platforms and scale desirable models to support high utilization at lower unit costs. Its preferred names are BMW (BMWYY) and Stellantis (STLA). Tesla has largely retained its technical leadership in electrical architectures, offering scale advantages and lower unit costs, says the firm. However, its valuation "appears indifferent to margin pressure from pricing and rising capital needs," adds Redburn. The firm rates it Sell, alongside Volkswagen (VWAGY) and Ford (F), where it also detects electric vehicle challenges.

Keeping a Sell rating on the shares, GLJ Research lowered the firm's price target on Tesla to $23.53 from $24.33 ahead of quarterly results as it moved its 2024 price target methodology to a price-to-earnings multiple. Taking the average 5.6-times forward price-to-earnings multiple Tesla's peers Ford and General Motors (GM) trade at, and applying a 268% premium to arrive at a 15.0-times price-to-earnings multiple, then applying that figure to its 2025 earnings per share estimate of $1.71, GLJ arrives at a fair value in 2025 of $25.65 per share. Using a 9.0% discount rate, the firm arrives at a 2024 price target of $23.53.

GLOBAL EV MOMENTUM STALLING: On Monday, Morgan Stanley lowered the firm's price target on Tesla to $345 from $380 but kept an Overweight rating on the shares ahead of Tesla reporting Q4 results this coming Wednesday, January 24. The EV market is over-supplied versus demand and global EV momentum is stalling, notes the firm. Morgan Stanley anticipates Tesla's 2024 outlook to be cautious on volume and profitability and rather than wait for what it expects to be a clearly cautious outlook for 2024, the firm wanted to mark-to-market its 2024 and 2025 estimates ahead of time. Morgan Stanely's 2024 non-GAAP EPS estimate falls below $2 and it sees "tough sledding for EVs," but remains Overweight on Tesla, citing AI and robotics optionality.

VOLUME PRESSURE: Barclays believes the most central theme for Tesla in 2024 is that it faces volume pressure in a demand-constrained environment. This year marks the first time in the company's history that volume will likely be more a function of demand than of Tesla's production capacity, possibly causing investors to revisit long-term volume expectations, the firm tells investors in a research note. Barclays expects Tesla to deliver 1.97M units in 2024, below the consensus at 2.19M units, and marking "only" 9% year-over-year growth in deliveries. The firm also sees the potential for a disappointing 2024 volume guide, perhaps around 2M units, but says it could see CEO Elon Musk "stoking interest" by citing potential on the earnings call for 2.2M-2.4M units if the macro and rate environment is more supportive. Barclays lowered its price target on Tesla to $250 from $260, while keeping an Equal Weight rating on the shares.

TOP PICK FOR 2024: Earlier this month, Argus named Tesla as one of the firm's 2024 Top Picks, while keeping a Buy rating and $316 price target on the name. Tesla has been challenged by a sluggish environment for electric vehicles as rising interest rates, elevated inflation, and supply-chain disruptions have pushed demand lower, but in 2024, these factors are set to turn positive as interest rates trend lower, benefiting customer affordability, inflation de-accelerates, benefiting vehicle manufacturing costs, and supply chains improve, the firm told investors in a research note.

DELIVERIES: Tesla said that in the fourth quarter, the company produced approximately 495,000 vehicles and delivered over 484,000 vehicles. In 2023, vehicle deliveries grew 38% year-over-year to 1.81M, while production grew 35% year-over-year to 1.85M. Tesla also reported Q4 Model 3/Y deliveries of 461,538.

More By This Author:

What Wall Street's Experts Say About Netflix Ahead Of Earnings
Wall Street's Top 10 Stock Calls This Week - Saturday, Jan. 20
Wall Street's Top 10 Stock Calls This Week - Saturday, Jan. 13