Wall Street's Bullish Call on Tesla

One of Wall Street’s biggest Tesla fans is finishing 2023 by doubling down on his bullish call. But there may be reason for caution as another analyst sees downside risk to fourth-quarter deliveries that could weigh on the stock.

Continued Confidence

Dan Ives, an analyst at Wedbush and long-time Tesla bull, must be feeling the spirit of the Santa Claus Rally, as the firm raised its price target on the stock to $350 from $310 and reiterated its Outperform rating. With analysts surveyed by FactSet rating Tesla at Hold, on average, with a consensus price target of $241—the stock closed Thursday at $254.50—Ives certainly is on the more bullish end.

A Promising Outlook

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.”

Skepticism Emerges

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.

Tesla's Fourth Quarter Delivery Projections Revised Downward

Tesla's fourth-quarter delivery projections have been revised downward by 4.2% compared to the prior estimate, according to analysts. Narayan, an industry expert, predicts that Tesla will deliver around 456,000 vehicles in the last quarter of 2023. This revised estimate is also 1.1% below the consensus forecast. If accurate, these numbers could lead to Tesla's total yearly deliveries falling short of their "around 1.8 million" guidance, potentially impacting the company's stock.

Uncertainty surrounds these estimates due to the possible influence of the Inflation Reduction Act (IRA) pull-forward effect in the last two weeks of the quarter. This effect may encourage customers to make purchases earlier than planned to avoid losing access to a $7,500 federal tax credit in 2024. Tesla's quarterly delivery report is expected to be released in the first week of January.

Although Tesla's app downloads indicate a stronger finish to the quarter across all regions, analysts are cautious about relying solely on this metric. Historically, using app download trends as an exclusive indicator has resulted in inaccuracies of over 20%. While it provides some insight, this data should be taken with a grain of salt.

Analyst Narayan points out that RBC has lowered its estimates due to weak registration data. Data from the U.S., Europe, and China suggest a sluggish start to the quarter in all three major regions, with November and early December showing strength primarily in China.

It remains to be seen how Tesla will navigate these challenges and whether they can meet their delivery targets. As the fourth quarter concludes, industry experts and investors will closely monitor Tesla's performance.