Written by Cláudio Afonso | [email protected] | LinkedIn | X
Canaccord Genuity analyst George Gianarikas has reiterated the firm’s price $234 target on Tesla shares while maintaining a Buy rating. The analyst sent out a new research note on Tuesday after Tesla reported production and delivery numbers for the first quarter of the year missing the consensus from the analysts.
In a new research note, Gianarikas says: “It’s easy to say that it’s all demand-related for reasons like: it’s Elon Musk’s fault for being so controversial, or (pick your geography) demand is terrible, or EV sentiment is waning. Some of those factors are likely partially responsible. Nonetheless – we continue to maintain that the issues of 1Q24 were somewhat demand-related but mostly supply-related. In its release, Tesla itself noted that the “decline in volumes was partially due to the early phase of the production ramp of the updated Model 3 at our Fremont factory and factory shutdowns resulting from shipping diversions caused by the Red Sea conflict and an arson attack at Gigafactory Berlin.”
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Regarding the discrepancy between production and deliveries, Canaccord analyst noted “We would add to that if Cybertruck were fully ramped at ~62.5k units a quarter of production, the story of the quarter would have been much different (we assume the company delivered 3.5k Cybertrucks in 1Q24). Which leads to the other interesting development of the quarter: the notable difference between production and deliveries – the largest in the history of the company. Why did that happen?”.
Later in the note, Gianarikas deep dove into demand and supply issues highlighting Tesla’s recent figures in China while commenting on the demand since the start of 2024.
“Adventure 1 – Demand issue. One reason could be that the company kept producing cars… that it could not sell at the end of the quarter due to an unexpected demand slowdown. In China, at least, press reports do indicate that management slowed production in March based on weaker demand – so, to a certain extent, that should have helped lower the production/delivery discrepancy – especially when the last week of March in China was solid from a demand perspective. However, Model Y inventory does appear to remain elevated in the US”.
“Adventure 2 – Supply issue. One could also theorize that the company finally started to ramp production of the Model 3 in Fremont, the Cybertruck in Austin, and the Model Y in Berlin in the last weeks of the quarter – leading to vehicles that couldn’t be delivered in time due to the late quarter ramp. Model 3s in the US do have delivery lead times that stretch into June. The truth probably lies in the middle – but we don’t know. We lean to it mostly being a supply issue – but we compel you to choose your own adventure. Clearly, demand has not been stellar since the start of the year,” Canaccord analyst continued.
“But, again, if the company were clear of supply issues and were able to sell as many updated Model 3s as it could in the US and Cybertrucks globally, we think the quarter would have looked much, much different. An interesting and pivotal (once again) conference call awaits as we look for answers,” the analyst concluded.
Also Deutsche Bank upheld its Buy rating on Tesla shares while reaffirming the $200 price target set in late March, which was previously adjusted from $218. However, the firm expressed concerns regarding the disparity between the produced and delivered figures.
Tesla will report its financial results for the first quarter of 2024 after market close on Tuesday, April 23rd followed by the conference call.
Written by Cláudio Afonso | [email protected] | LinkedIn | X
