Bank of America analyst John Murphy acknowledged that Tesla is on the road to gains but has to face some short-term pain on the way.
Murphy cited multiple challenges ahead for Tesla, including the company’s transition to producing its new Model Y vehicle. During the last earnings call, Tesla’s Chief Financial Officer Vaibhav Taneja announced that Tesla will start producing the new Model Y in all its factories simultaneously next month.
“While we feel confident in our team’s abilities to ramp production quickly, note that it is an unprecedented change, and we are not aware of anybody else taking the best-selling car on the planet and updating all factories at the same time. This changeover will result in several weeks of lost production in the quarter. As a result, margins will be impacted due to idle capacity and other ramp-related costs, as is common in any launch, but will be overcome as production is ramped,” noted Taneja.
Murphy predicts that the shift to Model Y Juniper in all of Tesla’s factories will result in a production loss of 100,000 vehicles. He believes Tesla will continue feeling pressure as it prioritizes volume growth. The analyst also observed that Tesla has a less defined outlook for 2025. He observed that Tesla seemed to be stepping back from Elon Musk’s Q3 2024 prediction that it would see 20-30% volume growth by this year.
Besides a shift in Model Y production, the Bank of America analyst forecasts that declining average selling prices, attractive leasing terms, and various incentives could put sustained pressure on Tesla’s gross margins.
Considering his forecast, Murphy lowered his 2025e EPS prediction for Tesla from $3.15 to $3.05. He remains cautious, with a Neutral rating and a $490 price target for Tesla shares.
The Teslarati team would appreciate hearing from you. If you have any tips, contact me at maria@teslarati.com or via Twitter @Writer_01001101.
