Elon Musk.
South China Morning Post
Bernstein lowered his price target for Tesla from $150 (around €139) to $120 (around €111).
This means a price decline of 33 percent compared to Wednesday’s level.
The company believes Tesla is trading too expensive compared to other automakers and has minimal upside catalysts in sight.
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.
Little can justify Tesla’s high share price because its profit margins are on par with lower-valued rival automakers, Bernstein wrote on Tuesday.
In addition, the electric vehicle company does not offer any obvious catalysts that could spur growth in the future, said analysts, who lowered their price target for Tesla from $50 (about 139 euros) to 120 dollars (about 111 euros) per share. This means a price decline of 33 percent compared to Wednesday’s level.
“Tesla’s share price remains high compared to traditional and faster-growing automakers on almost all valuation metrics and also looks expensive compared to the reduced growth expectations,” write analysts led by Toni Sacconaghi.
The EV maker has already suffered an aggressive share price decline since the start of the year, which was exacerbated by lost profits in the fourth quarter. The share has lost around 30 percent of its value since the beginning of the year.
However, despite the weak performance, Tesla still commands a massive premium over other automakers, with a valuation that is six times higher than other manufacturers. That’s because Tesla had a much higher growth rate in the past, but that’s less the case today, Bernstein said:
“Tesla’s margins today are on par with, or in some cases even lower than, U.S., Japanese and U.S. automakers, and its growth rate is more comparable to Toyota and Honda and lower than BYD,” Sacconaghi wrote .
And although Tesla has a higher multiple ratio than the large technology companies, the profit margins are also significantly lower in this group, Bernstein continued.
The note said weaker demand is hurting Tesla’s production volumes as electric car adoption slows in Europe and the US, while the launch of the Highland model in China has not resulted in a “step change” in demand.
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Bernstein cut its production forecast for the year to 1.98 million, compared to the consensus of 2.06 million. The tepid growth will continue until 2025. However, Tesla is still forecast to become the world‘s largest automaker by volume.
Optimistic investors might point to Tesla’s fully self-driving technology as a transformative project that should justify its share price over time. Bernstein notes that other manufacturers also competed in this area.
It’s also unlikely that Tesla will be able to gain traction as a robotaxi service since Waymo already dominates that field.
Others have also pointed to Tesla’s push into robotics and AI, including the Optimus and Dojo announcements. But as with self-driving, the company is already behind, with CEO Elon Musk dismissing Dojo as “far-fetched,” as quoted by Bernstein.
Read the original article Business Insider.
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