Investment bank Goldman Sachs has revised down its profit expectations for Tesla going forward based on the potential for additional price reductions.
In a Sunday report, Goldman analyst Delaney forecasts Tesla to earn $2.90 and $4.15 per share for the remainder of 2023 and 2024, respectively, down from $3 and $4.25 previously.
Delaney believes Tesla may make further price cuts in 2024 to drive higher sales volumes and market share. While boosting adoption, these reductions could negatively impact per-vehicle profitability.
The lowered EPS outlook factors in Tesla’s aim to aggressively scale production against the headwinds of incentives from the Inflation Reduction Act that might force competitive price adjustments.
Goldman’s report maintains a neutral rating on Tesla with a $275 price target. The bank sees ongoing tension between Tesla’s volume growth goals and its ability to sustain strong profit margins.
While lower prices can accelerate Tesla’s mission to drive mass EV adoption, it risks margin erosion as production costs decline at a slower rate. Tesla must balance growing sales with delivering earnings growth expected of a public company.
For now, Goldman remains cautious on profitability as Tesla continues to enhance affordability to stay competitive in an increasingly crowded EV space. But its technology leadership provides opportunities to thrive long-term if it can manage tradeoffs.