Tesla Stock Faces Potential 31% Downside After Record Delivery Miss, JPMorgan Warns

Tesla stock is poised for significant challenges following a substantial miss in first-quarter deliveries, as per JPMorgan's analysis. The bank has revised its Tesla price target to $115 from $130, indicating a potential downside of 31%. Despite a 59% decrease, JPMorgan highlights that the valuation remains high and demanding.

Record Delivery Miss Triggers Concern

After Tesla, the electric vehicle (EV) manufacturer, reported a significant delivery miss in the first quarter, JPMorgan expressed concerns about the company's performance. Tesla delivered 386,810 vehicles, falling notably short of Wall Street's estimates of approximately 450,000 units. Consequently, JPMorgan reaffirmed its "underweight" rating on Tesla and adjusted its price target downwards to $115 from $130, signaling a potential 31% decrease from the current levels.

Challenges Ahead for Tesla

The decline in Tesla's stock by 60% from its peak in 2021 has prompted JPMorgan to issue a bearish outlook. Analyst Ryan Brinkman emphasized that despite the significant drop, the valuation remains demanding. He attributed the challenges to diminishing demand and escalating competition in the market, indicating that investor patience might be wearing thin after a prolonged downturn.

Factors Contributing to Decline

Brinkman highlighted that Tesla's first-quarter delivery miss was the largest on record, underscoring the severity of the situation. The gap between analyst estimates and actual sales can be attributed to various factors such as the emergence of hybrid vehicles, disruptions in factory supplies, and fierce price competition from Chinese automakers. These challenges pose a threat to Tesla's premium valuation and long-term growth outlook.

Concerns Over Profitability

Brinkman expressed concerns over Tesla's deteriorating profits, driven by multiple price cuts on vehicles that have impacted profit margins. The declining profitability could intensify pressure on Tesla and its investor base. As a result, investors may shift their focus from Tesla's ambitious projects like autonomous cars and humanoid robots to the profitability of its core automotive business.

With the contraction in first-quarter deliveries and anticipated negative revenues, Brinkman warned that even optimistic investors may reassess their sentiments towards Tesla. The company faces the challenge of quickly restoring volume and revenue growth to sustain its valuation multiple amid ongoing market pressures.

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By: mfox@businessinsider.com (Matthew Fox)
Title: Tesla Stock Faces Potential 31% Downside After Record Delivery Miss, JPMorgan Warns
Sourced From: markets.businessinsider.com/news/stocks/tesla-stock-price-target-cut-jpmorgan-big-q1-delivery-miss-2024-4
Published Date: Wed, 03 Apr 2024 19:03:10 +0000