German multinational investment bank Deutsche Bank reportedly endorsed its bullish outlook on the American leading electric automaker, Tesla.
Deutsche Bank Analyst Emmanuel Rosner disclosed his stance on Tesla during the IAA Motor Show’s investor meeting in Munich, Germany. Tesla (TSLA) was rated at the “Buy” level with a price target of $300, Tesmanian reported.
Analyst Rosner highly believes that Tesla can strive in a challenging economic condition despite the possible investor guidance decrease due to the major price cuts.
Risks
Tesla’s series of price cuts can potentially result in a decline in investor expectations in the short term. According to Analyst Rosner, some investors mostly disregard the “bigger picture” as they focus more on the short-term condition.
Tesla’s production slowdown due to factory upgrades will also cause the investors’ expectations to drop, Investing.com reported. The company’s lack of cost offsets can also apparently increase these risks.
“The bulk of raw materials tailwind was indeed recognized in Q2, leaving modest additional benefit for Q3, and since larger cost improvements in Berlin/Austin factories are expected to come with volume stabilization post ramp up, they may not reach optimal level until 2024.”
Emmanuel Rosner, Deutsche Bank Analyst
Short-term pain, long-term gain
Despite the short-term risks, Analyst Rosner expects Tesla to witness notable growth in the medium to long term.
The Deutsche Bank Analyst further noted that Tesla will keep advancing in the Chinese electric vehicle industry.
Tesla recently launched the facelifted Model 3 Highland in China, offering local customers a new advanced EV model. Tesla China President Wang Hao also cited the Highland’s arrival at the 2023 China International Fair for Trade in Services (CIFTIS). It signifies the brand’s first model to be launched in the country instead of the US.
Wall Street Q3 2023 forecasts
Wall Street’s current expectation for Tesla’s Q3 2023 deliveries is at approximately 470,000 units, Barron’s reported. Meanwhile, it forecasts the brand’s operating profit margins to hit around 10%.
For reference, Tesla’s Q2 2023 sales were approximately 466,000 electric vehicles. Its operating profit margin was around 9.6%, indicating a notable drop from nearly 15% in the same period last year.
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Tesla believes that its new Model 3 Highland can deliver high demand for the brand in the coming quarters. It can boost the company’s profitability due to the expected lower cost of goods sold and a higher selling price than the prior model.
Tesla’s FY 2023 deliveries are expected to hit about 1.8 million EVs. It would increase to about 2.3 million units in 2024.
