Tesla is about to give investors some hints about what's to come, and one analyst believes Wall Street should brace for “growing pains.”
Colin Langan, an analyst at Wells Fargo, expects approximately 13% growth in Tesla TSLA,
Deliveries next year, below the company's long-term target of 50%. The year hasn't really gotten off to a great start for the electric car company, which has cut prices in China and temporarily halted production in Germany.
“There are also macroeconomic headwinds around higher interest rates
“EV adoption is flattening,” Langan wrote in a Tuesday note to clients. “In addition, there are signs of moderating growth in all three major regions.”
Tesla is expected to share more about the landscape, and its outlook for this year, when it announces its earnings next Wednesday afternoon. While Langan expressed caution about overall auto profits last quarter, Tesla is “examining those most at risk,” in his view.
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Wall Street will be focused on Tesla's earnings picture as well, and Langan expects the impact of price cuts to outweigh the impact of higher volumes in the fourth quarter. He models a gross margin of 15.4% for the period, which he said is below the 17% consensus on VisibleAlpha. FactSet lists a consensus estimate of 16.7%.
Langan is interested to know how higher rent prices in the US will affect profits, “since the leases will be eligible for IRA 45W credits,” or those related to the inflation control law.
He added: “Profits are made on leased vehicles over the lease period, and not up front like a regular sale.”
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Langan cut his price target for Tesla stock to $223 from $250, and the new target reflects his expectations of lower long-term growth.
Tesla shares fell 2.5% in Wednesday afternoon trading.
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