Experts see a big risk with Tesla. Associated Press
Tesla is a “non-growth growth company,” Wells Fargo said in a statement.
The bank downgraded its rating on the automaker and lowered its price target on the stock.
Wells Fargo analysts said the company is facing increasing headwinds.
This is a machine translation of an article from our US colleagues at Business Insider. It was automatically translated and checked by a real editor.
Tesla currently looks like a “growth company without growth.” The stock could see a double-digit decline, reflecting increasing headwinds to sales and earnings, analysts at Wells Fargo wrote this week.
In a statement on Wednesday, the bank downgraded its rating on Tesla from “neutral” to “underweight” and lowered its price target for the stock from $200 (about 183 euros) to 125 dollars (about 115 euros) per share. That represents a decline of about 23 percent from Thursday afternoon’s level, when the stock was trading at $163.09 (approximately 150 euros) at 1:57 p.m. ET.
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Wells Fargo analysts pointed to a growing number of challenges facing the electric vehicle maker.
Wall Street strategists warned that demand for electric vehicles will weaken in 2024. This means that Tesla must decide whether it will further reduce the prices of its vehicles in order to remain competitive and outdo rivals such as BYD from China and legacy US automakers.
“We see downside risk to volume as price cuts have a diminishing effect. We see headwinds from disappointing deliveries and further price cuts, which will likely result in negative EPS revisions,” Wells Fargo analysts said in their note. The bank’s outlook suggests Tesla’s earnings per share will be 32 percent below Wall Street estimates in 2024 and 52 percent below consensus estimates in 2025.
Meanwhile, Tesla’s expected launch of the lower-priced Model 2 may disappoint investors as the vehicle’s profitability is low and the timing of the launch appears to be “rushed.”
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Tesla could achieve a big lead in autonomous driving
The electric car manufacturer still has a few good arguments. Tesla appears to be “forward-thinking” when it comes to production, analysts said. The company has the potential to achieve a cost advantage if it continues to develop so-called unboxed production methods to reduce costs.
If the Dojo autonomous driving technology and supercomputer are successful, the company could “take a big lead in autonomy,” the Wells Fargo team continued.
Tesla shares got off to a bad start in the first quarter and fell 34 percent compared to January. The company slightly missed fourth-quarter revenue forecasts, taking in $25.17 billion (about 23 billion euros) in the most recent reporting period.
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