In anticipation of Tesla Inc’s (NASDAQ:TSLA) upcoming third-quarter report scheduled for October 18th, Wells Fargo has reaffirmed its Equal Weight rating on the electric automaker while slightly adjusting its 12-month price target from $265.00 to $260.00. The adjustment comes in light of Tesla’s recent announcement regarding third-quarter deliveries, which fell approximately 20,000 units short of the consensus estimate of 435,000 vehicles. Tesla’s management attributed this delivery shortfall to plant downtime associated with the Model 3 refresh.
Wells Fargo’s analysis suggests that, as a consequence of these lower delivery volumes and ongoing price reductions, Tesla’s automotive gross margin (excluding credits) for the third quarter is expected to be 16.3%, lagging behind the consensus estimate of 17.9%. Additionally, Wells Fargo anticipates a 20% decrease in third-quarter average pricing compared to its highest levels, resulting in a halving of the automotive gross profit per unit (excluding electric vehicle credits) when compared to its peak.
To meet its ambitious goal of delivering 1.8 million vehicles in fiscal year 2023, Tesla will need to deliver approximately 475,000 units in the fourth quarter, necessitating near-maximum utilization of its global production capacity. While the Model 3 and Model Y refreshes, along with the potential rollout of the Cybertruck boasting 1.9 million preorders, have the potential to stimulate demand, Wells Fargo analysts express reservations about whether these factors alone will suffice to achieve this target.