Investor Gary Black, founder of The Future Fund, has issued a cautious outlook on Tesla’s upcoming second-quarter deliveries, saying that the EV giant is likely to miss estimates.
What Happened
Black projected that the company would deliver around 370,000 vehicles in Q2, marking a 17% year-over-year decline, while falling short of consensus estimates by Wall Street analysts at 385,000, or 13% before estimates.
Expected Disappointment
“We expect TSLA 2Q deliveries due out next week to disappoint,” Black said, adding that the ideal re-entry price for the stock would be “in the $250 range,” which he notes is 30% below the price that his fund had exited a couple of weeks ago, at $358 a share.
Cannibalization Risk from Cheaper Models
Black also cautions that the company’s widely anticipated, upcoming affordable models could end up cannibalizing its sales instead of expanding its total addressable market, if they end up being just stripped-down versions of the existing Model 3 or the Model Y.
- If the 2023–2024 price-cutting experience repeats, a lower-priced, lower-cost model won’t expand TSLA’s total addressable market or generate incremental volume since it will merely cannibalize the higher-priced trims.
- Instead, Black argues that Tesla would need to introduce an entirely new form factor, such as a compact hatchback or a low-priced pickup, to attract new customer segments and generate true volume growth.
Price Action and Analyst Ratings
Shares of Tesla were down 1.43% on Friday, ending the week at $323.79, but it is up 0.75% after hours. Other leading analysts, such as Mark Delaney of Goldman Sachs, have since lowered their price targets for the stock to $290, with a “Neutral” rating, citing the company’s substantial demand and brand-related issues.
- However, Wedbush analyst Dan Ives has raised the target to $500 while reiterating its “Outperform” rating, saying, “We believe the march to a $2 trillion valuation for Tesla has now begun.”
Conclusion
The outlook for Tesla’s Q2 deliveries is uncertain, with some analysts predicting a decline in sales due to cannibalization from cheaper models. However, others remain bullish on the stock, citing the company’s potential for long-term growth. As the market continues to evolve, it’s essential to stay informed about the latest developments and analyst ratings to make informed investment decisions.