Tesla remains a favorite at Baird ahead of 1Q delivery numbers

By Michael Elkins

Baird reiterated an Overweight rating and $252.00 price target on Tesla (NASDAQ:) ahead of the electric automaker’s 1Q23 delivery numbers.

After negative estimate revisions and worries surrounding demand, recent price decreases and anecdotal data on sales seem to have relieved some bearish sentiment.

“The year is still early, but we continue to like the setup of the stock and believe bias for estimate revisions is to the upside,” wrote analysts.

Baird models ~403K deliveries in the 1Q compared with the consensus estimate of 432K. Analysts estimate that downtime at Shanghai associated with the Lunar New Year led to ~14K fewer vehicles produced than the reported target run rate of ~80K in February and March. Baird estimates ~1.7 million deliveries for the full year of 2023 vs. the consensus estimate of 1.83M, and believes production is comfortably on track to reach guidance of 1.8M.

TSLA began the year with price cuts in China and subsequently the U.S. which sparked concerns of a weakening demand environment. These concerns were somewhat put to rest after reports of strong sales in China and Musk remarking on the Q4 earnings call that TSLA saw “orders that are almost twice the rate of production”.

Musk also commented recently that lithium is the key input for which TSLA hasn’t seen deflation coming out of the pandemic, until now. Baird analysts estimate that the recent decline in lithium prices, which have fallen ~20% since all-time highs in January, may give TSLA room to cut prices or expand its industry-leading margins while putting pressure on competitors. The recent drop in lithium prices and other costs could be a boost to margins in Q2.

Shares of TSLA are up 1.41% in pre-market trading on Wednesday.