Tesla, described as a "growth company with no growth" by Wells Fargo, has recently been downgraded by the bank. The analysts at Wells Fargo downgraded the carmaker's rating and lowered its price target for the shares, citing a series of challenges ahead.
Growing Headwinds for Tesla
According to Wells Fargo analysts, Tesla is currently experiencing a situation where it resembles a "growth company with no growth." They anticipate a potential double-digit decline in the stock price due to increasing headwinds affecting sales and earnings.
Downgrade Details
On Wednesday, Wells Fargo officially downgraded Tesla's rating to "underweight" from "neutral" and reduced the price target per share from $200 to $125. This adjustment suggests a possible 23% decrease from the trading price on Thursday afternoon, which was $163.09 per share.
Challenges Ahead
The analysts highlighted several challenges that Tesla is expected to face, including a projected slowdown in electric vehicle demand in 2024. This could prompt Tesla to consider lowering prices to stay competitive against rivals like China's BYD and traditional US automakers.
Wells Fargo analysts expressed concerns about potential negative impacts on volume from continuous price reductions, disappointing deliveries, and further price cuts, leading to downward revisions in earnings per share. They predict Tesla's EPS to fall 32% below Wall Street's estimates in 2024 and 52% below consensus estimates in 2025.
Future Outlook
Despite the challenges, Tesla still has some strengths, according to the analysts. The company's forward-thinking approach to manufacturing, particularly in developing cost-saving unboxed production methods, could provide a competitive advantage.
If Tesla's advancements in full self-driving technology and the success of its Dojo supercomputer materialize, it could establish a significant lead in autonomy. However, concerns remain about the profitability and timing of the upcoming more affordable Model 2.
Stock Performance and Outlook
Tesla's stock faced a turbulent start in the first quarter, dropping 34% from January levels. The company slightly missed revenue forecasts in the fourth quarter, reporting $25.17 billion in revenue for the period.
Despite the challenges and uncertainties, Tesla continues to navigate the evolving landscape of the electric vehicle market.
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By: jsor@businessinsider.com (Jennifer Sor)
Title: Tesla Faces Challenges as Wells Fargo Downgrades Stock
Sourced From: markets.businessinsider.com/news/stocks/tesla-stock-price-drop-outlook-growth-earnings-production-fsd-profits-2024-3
Published Date: Thu, 14 Mar 2024 18:16:59 +0000
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