Tesla stock fell Monday, dropping back to a buy point. Fueled by big price cuts worldwide and U.S. tax credits, Tesla deliveries hit a record in the first quarter, but the electric-vehicle giant fell short of estimates again. Analysts predict Tesla will continue to face pricing pressure in Q2.
TSLA stock surged 68% in the first quarter, breaking out on Friday.
Tesla Deliveries
Tesla deliveries rose 36% vs. a year earlier to 422,875. That was 4% above the prior record of 405,278 in Q4. But Wall Street was expecting around 431,000 Tesla deliveries, according to FactSet. However, Tesla did beat some other consensus forecasts.
Q1 deliveries included 412,180 Model 3 and Y vehicles, along with 10,695 Model S and X luxury vehicles.
Production once again exceeded deliveries, at 440,808. Model S and X production was at 19,437.
Tesla has missed delivery estimates for several quarters. In Q4, analysts had expected roughly 420,000.
Analysts predict Tesla deliveries in 2023 to come in around 1.8 million, up from 1.313 million in 2022.
Tesla Stock: How Will TSLA React?
Tesla stock sank 6.1% to 194.70 in Monday during market trade, testing Friday's breakout.
On Friday, Tesla stock jumped 6.2% to 207.46, clearing a 200.76 cup-with-handle buy point, according to MarketSmith analysis. However, shares are close to their 200-day moving average, a possible resistance area.
On Jan. 3, the day after it missed fourth-quarter delivery estimates, Tesla shares sank more than 12%. That day remains the worst for Tesla stock in 2023. But shares have rebounded on the year, gaining around 68%. Tesla stock bottomed on Jan. 6, as the EV giant announced big price cuts in China and Asia and as the market staged a follow-through day. Tesla followed up with price cuts in Europe and the U.S. on Jan. 13. The EV maker has made subsequent price cuts in Europe as well as U.S. cuts for the Model S and X.
New U.S. tax credits of up to $7,500 also buoyed Tesla demand.
With deliveries out of the way, the next question is how the price cuts affected Tesla earnings and gross margins. The EV giant is due to report Q1 results on April 19.
What The Fourth-Quarter Numbers Were
CFRA analyst Garrett Nelson on Friday upgraded Tesla stock to a "Strong Buy" rating. The analyst also increased the firm's TSLA price target to 275, up from 250.
Despite the deliveries miss, Nelson on Monday maintained both the rating and price target for Tesla stock. The analyst wrote "the Tesla story has a lot going for it and we reiterate our Strong Buy recommendation."
"While we consider the release a mild disappointment, any negative stock price reaction will likely be muted by news of OPEC's surprise output cut, which caused oil prices to jump and we consider bullish for EV sales," Nelson said.
Wedbush analyst Daniel Ives, a longtime Tesla bull, wrote on Twitter Sunday the numbers keep Tesla on pace for 1.8 million deliveries in 2023.
"Overall solid number to be digested well by the Street," Ives wrote.
TD Cowen on Monday also raised its Tesla price target to 170, up from $140, while maintaining a "Market Perform" rating on TSLA.
Tesla Stock Analysts: More Price Cuts Needed
However, Citigroup analyst Itay Michaeli wrote Monday he expected a slight pullback in Tesla stock after its delivery report.
Michaeli told investors the growing spread between production and deliveries will likely maintain focus on more price cuts in Q2.
The Citigroup analyst added that TSLA shares could retreat slightly with Q1 deliveries regarded as an in-line outcome with softer mix and lingering inventory build concerns.
Bernstein analyst Toni Sacconaghi added Monday that Tesla Q1 deliveries were largely expected and that more price reductions are needed. Bernstein has an "Underperform" rating on Tesla stock with a price target of 150.
"We continue to believe that TSLA will need to further lower prices this year and/or next year to achieve its volume targets," Sacconaghi wrote.
Price Cuts And China
Meanwhile in China, the world's largest EV market, Tesla was on pace for record monthly deliveries in March. Tesla sold 140,453 China-made vehicles in the first two months of the year. The global EV giant exported 57% of those vehicles to Europe and elsewhere.
China EV Sales Rebound In March; BYD Sales Nearly Double
On Tuesday, top Tesla competitor BYD reported skyrocketing earnings for the fourth quarter and full year. This comes amid an EV price war in China triggered by Tesla, which led to BYD cutting prices on models to compete with Tesla.
Tesla trimmed prices in China on Jan. 6, following big cuts in late October, 2022. The global EV giant also significantly reduced prices in the U.S. and Europe on Jan. 13. In the U.S., Tesla also is benefiting from new tax credits. The company reduced European prices again in early March, with further U.S. discounts for the Model S and X.
However, Tesla's lowest-priced vehicle, the Model 3, is expected to have its $7,500 U.S. EV tax credit reduced by April 18. The Biden administration announced Friday vehicles eligible for the full $7,500 tax credit must have batteries with specific amounts of components from North America and critical minerals sourced in the U.S. or from certain countries.
Vehicles that meet one of the critical minerals or battery components requirements will be eligible for a $3,750 tax credit.
The battery criteria goes into effect April 18, when a list of models that qualify for the full $7,500 tax credit will be issued.
The Model 3 contains a battery from China. Tesla's Model 3 page on its website has a banner informing EV shoppers the "$7,500 tax credit is anticipated to be reduced for Model 3 on April 18. Take delivery now."
The average Tesla vehicle selling price in the first quarter was around $46,780, according to FactSet. That's down from $51,400 in the fourth quarter and $52,100 a year ago.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
