Credit Suisse cuts Tesla price target, says deliveries will fall short because of China

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Credit Suisse on Friday reduced its Tesla target price, pointing to a potential shortfall in second-quarter deliveries as the company’s suppliers recover from Covid shutdowns in Shanghai. The firm lowered its target to $1,000 from $1,025, citing increased competition, poor execution on growth plans, disruptions from Covid-19 restrictions and input cost inflation. “We expect Tesla 2Q’22 deliveries of 242k vs. sell-side consensus of ~280k, largely driven by the Shanghai COVID shutdown,” analyst Dan Levy said in a note Friday. “Moreover, given the lower deliveries outlook, the associated margin impact, and an expected Bitcoin impairment, we reduce our 2Q EPS estimate to $1.10 from $2.06, and below consensus $2.08.” Levy also cited other near-term challenges for Tesla, including the recent growth sell-off, production disruptions in China, the lingering semiconductor shortage and inflationary pressures. Credit Suisse reduced its auto gross margin estimate for the second quarter to 22.7% from 24.7%. That’s compared to the first-quarter margin of 30%. Still, the firm kept its overweight rating on the stock, despite the cut in target price. “Robust fundamentals ahead should outweigh the near-term challenges for Tesla,” he said. “We believe the long-term case for Tesla is clear – Tesla remains the global leader in EV, and amid rising supply chain risks, we believe Tesla’s lead over other automakers in the race to EV is only amplified given its lead in vertical integration and its prior EV experience.”

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