Tesla (TSLA) The stock was downgraded early Wednesday amid expectations of disappointing first-quarter deliveries, vehicle price cuts and pessimism across the market over the electric vehicle giant's long-awaited next-generation offering.
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Wells Fargo downgraded Tesla to underweight, down from equal weight, on Wednesday with a price target of 125, down from 200. An underweight rating for the company is equivalent to a sell rating and its price cut represents a 30% downside risk to current TSLA levels.
Wells Fargo expects Tesla unit volumes to disappoint due to price cuts with its view that vehicle price cuts have a diminishing impact on demand. The company also wrote on Wednesday that it believes the economics of Tesla's next-generation vehicle, widely known as the Model 2, are “likely to be challenging” as a mass-market compact vehicle.
It comes after Everscore wrote on Monday that Tesla's new, cheaper car may not ramp up until 2027, with 500,000 units in 2026.
“Tesla is increasingly becoming the story of 2027,” Evercore analysts wrote.
Tesla Stock: Could It Rebound?
However, with Tesla shares down more than 28% in 2024, one longtime Tesla bull remains bullish on the leading electric car company.
Wedbush Securities analyst Dan Ives maintained an outperform rating with a price target for Tesla stock of 315 on Wednesday. The longtime Tesla bull wrote that he expects about 430,000 deliveries in the first quarter, below the Wall Street consensus of 487,000. Ive is optimistic that deliveries will rise throughout the year.
Having just returned from a trip to Asia, it appears that many of the price cuts “will start to ease through spring/summer 2024 which is good news for Tesla and the electric vehicle industry,” the analyst noted.
“Tesla's narrative is as negative as we've seen in the last few years, with Musk and Tesla being attacked by bears from all directions,” Ives wrote.
“We believe the stock is beyond the downside as the demand story for Tesla is more in a stabilizing mode heading into the rest of 2024,” he said.
Tesla stock performance
TSLA shares fell more than 2% during Wednesday's pre-market session. On Tuesday, Tesla stock fell 0.1% to 177.54. TSLA is still down 12% in March.
With 2023 in the rearview mirror, the analyst consensus now points to Tesla's 2024 earnings being below the 2023 level, suggesting another year of negative growth for this growth stock.
Wall Street expects Tesla to generate earnings of just $3.03 per share in 2024, according to FactSet. That would be a decline of more than 2% versus $3.12 a year ago.
Morgan Stanley Tesla bull Adam Jonas last week issued an investment note in which he cut Tesla's 2024 earnings forecast by 25%, saying the electric car giant could “likely” lose money this year.
Jonas cut his Tesla stock price target to 320, down from 345, but maintained an overweight rating on the stock. Jonas also trimmed his forecast for Tesla 2024 EPS to $1.51, his previous view of $2.04 per share, with auto gross profit margins, excluding regulatory credits, falling to 11.4% as the analyst expects EV demand issues to persist.
The electric vehicle giant ranks eighth in the 35-member IBD Automotive Manufacturers Industry Group. The stock has a 32 Composite Rating out of the best possible 99 ratings. Tesla stock also has a Relative Strength Rating of 11 and an EPS Rating of 68.
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