Tesla Inc's (NASDAQ:TSLA) lower-than-expected margins are within the “margin of error”, that's according to analysts at Jefferies.
Elon Musk’s electric car maker, in an earnings report released overnight, revealed higher than expected earnings even though its automotive gross margin fell to 25.9% in the final quarter of 2022, versus 30.6% in the same period a year earlier, as a result of a price war it has recently unleashed in the US, Europe and China.
Jefferies, in a note, suggested the lower margin figure, about 2% shy of market consensus, was caused by the “rapidly changing environment” which saw soaring inflation in input costs but also required price cuts to support sales as consumers continued to be squeezed.
It raises doubts for Tesla’s 2023 forecasted 23.5% auto gross margin, Jefferies added, which now says market expectations could be further adjusted in the coming weeks depending upon how the EV industry reacts to Tesla price cuts.
Jefferies nevertheless repeated a ‘buy’ rating for Tesla, acknowledging its revenue and gross profit which were up 37% and 19% respectively on the fourth quarter of 2021.
The investment bank also raised its price target by 25% to US$180, up from US$158.
Jefferies said it expects Tesla to produce 1.74mln vehicles in 2023, which falls short of the company's own target of around 1.8mln units.
Tesla’s share price shot up by 9.3% in early US trading following last night's post-market release of the figures, which confirmed record vehicle deliveries of 1.31mln units in 2022 whilst highlighting revenues and profits were each up over 50% for the year.