Tesla (TSLA) -) shares moved lower in early Monday trading after analysts at Goldman Sachs lowered their profit forecasts for the clean energy carmaker, citing narrowing margins and lower selling prices.
Goldman Sachs analyst Mark Delaney held to his 'neutral' rating on Tesla, as well as his $275 price target, but suggested that recent price cuts are likely to pressure gross margins, which are already declining, and lead to lower overall profits this year and next.
Tesla earned 91 cents per share over the three months ended in June, a 20% increase from the same period last year, even as revenue surged 47% to a record $24.5 billion.
That gap was largely explained by a sharp reduction in adjusted automotive margins, which were pegged at 18.7%, down from the year-earlier tally of 22.4% following a series of price cuts in its biggest global markets.
"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)," Delaney wrote.
"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)," Delaney added. "However, Tesla raised pricing on the Model 3 with the refreshed version (Highland) that is now being sold in Europe and China."
Tesla shares were marked 3% lower in early Monday trading to change hands at $266.10 each.
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Tesla Chief Executive Elon Musk told investors in July that "it does make sense to sacrifice margins in favor of making more vehicles because we think, in the not too distant future, they will have a dramatic valuation increase."
He said Tesla would continue to focus on winning market share, as opposed to widening profit margins, over the back half of the year
