01:40 PM EDT, 04/03/2024 (MT Newswires) -- Tesla's (TSLA) "big" first-quarter delivery miss likely reflects slowing demand and could prompt markets to reassess growth expectations for this year and 2025, with a possibility for some downward revisions, UBS Securities said in a note e-mailed Wednesday.

The electric vehicle maker said Tuesday it delivered 386,810 vehicles and produced 433,371 units for the March quarter. The projections on Visible Alpha were for about 454,200 and 462,100 units, respectively. The company partly attributed the drop in volumes to factory shutdowns amid shipping diversions caused by the recent Red Sea conflict.

Tesla's shares slumped 4.9% Tuesday, the steepest decline on the Nasdaq Composite. The stock was up 0.8% intraday Wednesday.

The company's deliveries missed even the "most bearish" projections, UBS analyst Joseph Spak said in the note. The lowest buy-side expectations indicated a roughly 400,000 print, according to Spak. "There were some unique factors that impacted production in the quarter, but we believe demand is slowing."

The results indicated an annual drop in deliveries at a rate greater than the production decline, which Spak said will do "little to ease" market concerns regarding growth. There's a possibility that the company was caught with more inventory at the end of the quarter.

"However, the optics of being lower on deliveries are unlikely to help sentiment, especially when (Tesla) entered the quarter with higher levels of inventory," the analyst wrote. UBS has a neutral rating on the stock, with a $165 price target.

The company is scheduled to report its first-quarter financial results April 23, with the focus now likely to shift to margins, Spak said. The consensus on Wall Street for auto gross margins excluding credits is for roughly 16%, which UBS said was too high. The brokerage was looking for 13.9%, according to the note.

"We believe the market will reevaluate growth expectations not just for 2024, but also 2025, with some downward revisions likely," Spak wrote. UBS expects Tesla to focus on full self-driving, or FSD, updates as the company is now offering one-month free trials of FSD. "Amid a period of slower growth, higher FSD adoption and other initiatives like energy are increasingly needed until new automotive product comes to market," according to the note.

Price: 167.79, Change: +1.16, Percent Change: +0.69