Goldman Sachs analysts have predicted that Tesla’s ongoing series of price cuts for its electric vehicles (EVs) will put further pressure on the company’s margins in the coming year, according to a research note by Goldman’s Mark Delaney.
While the price reductions for Tesla’s Model S and Model X cars will impact earnings this year, there will only be a partial offset from higher prices for the Model 3. As a result, the average selling prices across Tesla’s range will be lower, leading to reduced gross margins.
Delaney also noted that Tesla may continue lowering prices in 2024 to support higher volumes, thus mitigating the earnings per share benefit from cost reductions.
In light of these factors, Goldman Sachs analysts have revised their earnings per share forecast for Tesla. They now predict an EPS of $2.90 for this year, down from the previous estimate of $3.00. Their revised forecast for 2024 stands at $4.15, compared to the previous estimate of $4.25.
These forecasts align closely with the consensus estimates among analysts tracked by FactSet, who predict an EPS of $2.89 for this year and $4.50 for 2024.
Despite the potential impact on margins, Delaney expects Tesla to deliver approximately 2.3 million vehicles in 2024. This projection is in line with Wall Street estimates and represents an increase from the expected 1.8 million deliveries this year.
Delaney has maintained a Neutral rating on Tesla’s stock and set a twelve-month target price of $275. As of Monday, Tesla shares were down 2.5% at $267.51 during early trading. However, they have still more than doubled in value this year.