Bernstein analyst Toni Sacconaghi kept his ‘underperform’ and $150 price target for Tesla’s stock (TSLA) following the disappointing Q3 report that showed shrinking profit margins and revenues. Tesla shares fell 7% in the premarket. 

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Tesla’s Q3 Report Misses Expectations Across the Board

Shares of Tesla are down 7% in premarket trading Thursday after the company’s Q3 results expectedly missed Wall Street estimates across the board, partly due to the impact of the company’s series of price cuts throughout 2023.

The company reported adjusted earnings per share (EPS) of 66 cents, below the consensus projection of 73 cents. The automaker generated $23.35 billion in revenue in Q3, while analysts expected $24.1 billion. This was the first time Tesla delivered worse-than-expected EPS and revenue since its Q2 2019 report. 

Tesla’s total operating margin – a key profitability measure closely watched by investors and analysts – came in at 7.6%, substantially lower than the 17.2% reported in Q3 2022. The automaker’s non-adjusted income was reported at $1.85 billion, while total gross profit plunged 22% from a year ago. 

In the wake of the report, Bernstein analyst Toni Sacconaghi affirmed his underperform rating and $150 price target on the auto stock, which implies a nearly 40% downside from Wednesday’s closing price of $242.68. 

“5% auto revenue growth, collapsing margins and trading at 200x FCF — is the story broken? In many ways, Tesla is increasingly looking like a regular auto company.” 

– the analyst said in a Thursday note.

Wall Street’s Mixed Views on Tesla

Saconnaghi’s description of Tesla as a “regular auto company” may be the analyst’s response to the carmaker’s previous attempts to establish itself as a technology business. 

Additionally, numerous analysts have raised concerns that TSLA has been an incredibly overvalued stock in the past months, and the numbers confirm it. The automaker’s price-to-earnings (P/E) – a valuation gauge that measures the current market of a stock relative to its earnings – currently stands at a whopping 68.9x, compared to Ford’s 11.4x and GM’s 4.1x. 

Another cause for concern in Tesla’s Q3 earnings call is Elon Musk’s commentary on the upcoming Cybertruck. Notably, the billionaire said the long-awaited electric pickup truck is not expected to deliver significant positive cash flow in the 12-18-month period after its production begins. 

Despite these headwinds, some analysts are not as bearish on the world’s biggest car manufacturer. Morgan Stanley’s Adam Jonas reduced his price target on TSLA from $400 to $380, which still implies a significant upside from the current market price. The strategist also has a top pick rating for the carmaker’s shares. 

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