Gary Zhou 
Key Points
- 💰 Goldman Sachs decreased Tesla’s earnings forecast, citing concerns that price cuts by the EV company could impact its earnings per share (EPS).
- 📉 Tesla’s earnings are expected to be $2.90 and $4.15 per share for the remainder of 2023 and into 2024, down from previous estimates of $3.00 and $4.25, respectively.
- 🚗 Tesla reduced prices for the Model S/X by 15-19% on September 1st and lowered Model Y pricing in China in mid-August, while raising prices for the Model 3 in Europe and China.
- 🌍 The availability of the Tesla Model 3 Highland depends on tax credits from the Inflation Reduction Act (IRA), and initially, it was not available in the United States and certain parts of Europe.
- 📊 Despite the earnings forecast downgrade, Goldman Sachs maintained a neutral rating on Tesla with a price target of $275 for TSLA.
In a note released on Sunday, Goldman Sachs decreased its earnings forecast for Tesla, stating that the EV company’s price cuts might hinder its earnings per share (EPS).
“We believe that Tesla could further lower prices in 2024 to support higher volumes, which we believe will mitigate the EPS benefit from cost reductions,” wrote Goldman Sach’s analyst Mark Delaney.
Goldman Sach’s Mark Delaney forecasts that Tesla will report earnings of $2.90 and $4.15 per share for the remainder of 2023 and into 2024, down from $3.00 and $4.25, respectively. Delaney wrote that the downgrade is due to Tesla’s aim for higher production. He believes higher production would hit gross margins before accounting for state incentives and tax credits from the Inflation Reduction Act (IRA).
“We lower our 2023 and 2024 EPS estimates for Tesla, mostly on lower ASPs and, in turn, auto gross margin ex-credit assumptions (driven by lower prices for S/X and, to a lesser extent, Model Y, and partly offset by higher Model 3 ASP assumptions).
“Tesla materially reduced S/X pricing on 9/1 by 15-19%, and reduced Model Y pricing in China in mid-August (and has been discounting inventory on hand in other markets like the US this quarter). However, Tesla raised pricing on the Model 3 with the refreshed version (Highland) that is now being sold in Europe and China,” said the Goldman Sach note.
As of this writing, the Tesla Model 3 Highland is unavailable in the United States and certain parts of Europe, including the United Kingdom. The Model 3 Highland’s availability in the U.S. likely depends on tax credits from the IRA. Initially, Tesla Model 3 RWD and Long Range units only qualified for $3,750 in IRA incentives because they used batteries from China. In June 2023, Tesla announced changes to its Model 3 pricing as it decided to reserve vehicles using Chinese batteries for other markets.
Delaney maintained a neutral rating on Tesla and reiterated his price target of $275 for TSLA.
