Wells Fargo analyst Colin Langan predicts that Tesla's deliveries will grow by about 13% next year, which is below the company's 50% long-term target. Langan points to several challenges that Tesla is currently facing, including price cuts in China, production pauses in Germany, macroeconomic headwinds, and signs of moderating growth in key regions.
Tesla is set to disclose more details about its outlook for the year in its upcoming earnings report. Langan expresses caution about the company's automotive earnings in general, but believes that Tesla is particularly at risk. Wall Street will be closely watching Tesla's profit picture, with Langan suggesting that price cuts have had a greater impact than increased volumes in the latest quarter. He expects a gross margin of 15.4%, which is lower than the consensus estimate of 17%.
One area of interest for Langan is the effect of higher leasing rates on Tesla's profits, as leases would qualify for IRA 45W credits under the Inflation Reduction Act. Unlike a normal sale, profits on leased vehicles are realized over the lease life rather than upfront.
Langan has lowered his price target on Tesla's stock to $223 from $250, reflecting his expectations for lower long-term growth.
Tesla shares are down 2.5% in afternoon trading on Wednesday.