Tesla Stock Gets a Price Target Boost. Why Analysts May Be Too Optimistic.

At the heart of Ives’ thesis is a view that Tesla’s market share in electric vehicles is likely to rise in 2024, including in China, while margins—under pressure amid price cuts—stabilize. Wedbush also is optimistic that Tesla’s Full Self-Driving capabilities will continue to improve amid upgrades to its artificial-intelligence technology.

“We view Tesla where
Apple
was in the 2008/2009 period,” Ives wrote in a note. “Tesla will reach the $1 trillion market cap in 2024 despite growing skepticism.”

Indeed, elsewhere on Wall Street there is more skepticism over Tesla, and there are signs it may even be creeping in on the bulls. RBC Capital Markets analyst Tom Narayan looked more like a Tesla skeptic on Thursday as he slashed his fourth-quarter delivery estimates for Tesla, pointing to downside risk for the consensus expectations—a market-moving metric. RBC rates Tesla at Outperform with a $300 price target.

Narayan estimated that Tesla will see deliveries of 456,000 vehicles in the fourth quarter of 2023, down 4.2% from his prior estimate and 1.1% below consensus. If the figure is indeed that low, it could cause Tesla’s yearly deliveries to come in at 1.78 million units, at the low end of its “around 1.8 million” guidance. That could hurt the stock.

“We could see a very significant push in the final two weeks due to (Inflation Reduction Act) pull-forward, creating uncertainty in our estimates,” Narayan noted, adding that he expects Tesla to report its quarterly deliveries in the first week of January. Some of Tesla’s U.S. customers lose access to a $7,500 federal tax credit in 2024, so that IRA pull-forward refers to pressure on customers to buy before the quarter is up.

But RBC still cut its estimates because registration data look weak, according to Narayan. Monthly registration data from the U.S., Europe, and China “point to a weak start to the quarter for all three major regions, and strength in China in November/early December,” Narayan wrote.

Tesla app downloads, another barometer for deliveries, look slightly better, suggesting “a stronger finish to the quarter across all regions, consistent with a bigger end of quarter push,” Narayan wrote. However, methodology exclusively using app download trends has historically missed by 20% or more, Narayan noted, so “we take this with a grain of salt.”

But obviously not enough salt to discourage the more bearish move. Maybe Ives should take note.

Write to Jack Denton at jack.denton@barrons.com