Investor's Corner

Citi trims Tesla (TSLA) estimates as Wall Street tempers Q2 expectations

Credit: Tesla China/Twitter

As Tesla (NASDAQ:TSLA) approaches the end of the second quarter, Citi Research analyst Itay Michaeli has cut his forecasts for the company.

In a note on Tuesday evening, the Citi analyst updated his model to reflect headwinds from Tesla’s business in China. Tesla China’s pace was disrupted by a substantial margin in the second quarter due to the country’s strict Covid-19 lockdowns. The lockdowns caused Giga Shanghai to halt vehicle production for over three weeks.

Michaeli’s note also pointed out cost increases that could end up squeezing Tesla’s margins for the second quarter. Overall, Citi now expects Tesla to deliver a total of 258.5K vehicles for Q2 2022 and about 1.42 million for the whole year. Michaeli also expects auto gross margin ex. credits to reach 26.5% in Q2 and 29.5% for the whole year.

The Citi analyst lowered his 2022 EPS estimate by about 2% due to the challenges faced by the EV maker in the second quarter. Michaeli also lowered his operating expense estimates for Tesla as the company is cutting costs and optimizing its headcount.

Citi is not the only Wall Street firm that has posted updated estimates for Tesla this second quarter. Deutsche Bank analyst Emmanuel Rosner also cut his Q2 estimate for Tesla to 245k units. Just like the Citi analyst, Rosner cited Tesla’s headwinds in China as a reason for his tempered expectations.

“We cut our 2Q deliveries estimate by 65k to 245k units, reflecting a prolonged Covid-19-related shutdown and logistical challenges in the Shanghai factory,” Rosner noted.

Earlier this month, Morgan Stanley analyst Adam Jonas also reined in his estimates for Tesla’s second quarter results to 270k vehicles. His previous estimate for Tesla’s Q2 2022 vehicle deliveries was an optimistic 316k units.

Disclaimer: I am long TSLA.

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Citi trims Tesla (TSLA) estimates as Wall Street tempers Q2 expectations
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