Tesla (NASDAQ: TSLA) stock fell over 3% in pre-market trading on Monday after UBS analysts lowered their price target on the electric vehicle giant. The investment bank cut its target from $259.00 to $225.00 while keeping a Sell rating on the stock, signaling concerns about weaker demand and shrinking profit margins.
The adjustment comes as UBS revised its delivery forecast for Tesla in the first quarter of 2025. The bank now expects the EV giant to deliver 367,000 vehicles, down from its earlier estimate of 437,000. This new estimate reflects a 5% drop year-over-year and a 26% drop from the last quarter. It also lands 13% below the current Visible Alpha consensus, suggesting Wall Street may be too optimistic about Tesla’s output.
The analysts noted that Tesla’s delivery pace has slowed recently. But, they believe the EV giant could see a jump in shipments toward the end of the quarter, possibly due to more aggressive promotions. Their view is backed by data from UBS’ Evidence Lab, which has been tracking delivery times for Tesla’s Model 3 and Model Y in major markets. The data shows customers are waiting less time for these vehicles, a clue that demand might be softening.
The weaker delivery outlook also prompted UBS to cut its estimate for Tesla’s first-quarter auto gross margin, excluding credits. The bank now expects a margin of 10.3%, a notable decrease from 13.6% in the fourth quarter of 2024 and 16.4% in the first quarter of 2024. This figure is well below the consensus estimate of around 13.5%, which UBS argues is too optimistic given the lower delivery numbers. Analysts attribute the potential margin drop to production hiccups—like factory changeovers and downtime—that Tesla has already flagged, along with the added pressure of more discounts to spur sales.
The fallout extends to earnings as well. UBS cut its earnings per share (EPS) estimate for Tesla (NASDAQ: TSLA) in Q1 2025 to $0.37, down 28% from the consensus forecast. This reduction reflects the challenges of lower deliveries, squeezed margins, and the added expense of potential promotions.
