“In the last few months, tracking Tesla fundamentals has felt a bit like watching paint dry,” wrote Jeffries analyst Philippe Houchois in a note on Monday. Jeffries reduced its Tesla price target from $265 to $250, citing fears of dwindling leadership and concerns about inventory and growth.
“More margin erosion in Q3 and uncertain growth in 2024 still raise questions whether Tesla’s earlier profit edge was structural or a timing difference.
“We continue to think that everything Tesla does differently from the rest of the industry can also be done by others if given time, making speed essential to maintain an edge,” Houchois stated.
The Jeffries analyst suggested that Tesla’s edge in technology has started crumbling based on delays in battery development and feature launches. He mentioned concerns over Tesla’s declining prices and dwindling management team.
Last week, Tesla cut Model Y and Model 3 prices in the United States for the fourth quarter. Tesla delivered 419,074 Model Y and Model 3 vehicles in the third quarter. In Q2 2023, Tesla delivered 446,915 Model Y and Model 3 units. Analysts expected a decline in Tesla deliveries in the third quarter due to preparations for Giga Shanghai’s Model 3 Highland and Giga Texas’ shutdown for Model Y and Cybertruck assembly line upgrades.
In the summer, Tesla’s Chief Financial Officer, Zachary Kirkhorn, announced that he would be stepping down from his position. However, in April, JB Straubel retired to Tesla as a member of the Board of Directors.
Houchois sees hyperscaling through model concentration as Tesla’s one remaining unique feature. He believes that Tesla will reach its limits with hyperscaling without the launch of more volume modes. The Tesla Cybertruck and its machine learning approach appear to be the company’s rays of light in the Jefferies analyst’s otherwise bleak forecast.
“Cybertruck may fit the profile, but production challenges and lack of specs keep us in the dark,” he said. The Jefferies analyst believes Tesla’s machine learning approach appears to be its “most scalable solution.” However, Houchois thinks that it lacks a business model.