Tesla stock price: new target and profit forecast

The reversal of Tesla Inc (NASDAQ:TSLA) as this year’s worst-performing S&P 500 stock continued today amid concerns about slower electric vehicle demand and China competition.

Tesla stock traded 2% lower at $166 in the first hour of US dealings, having slumped 4.5% on Wednesday in response to Wells Fargo downgrading its stance to “underweight”.

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UBS also scaled back its price target from $225 to $165 after cutting its vehicle delivery forecast for the first quarter to 432,000, some 10% below Wall Street consensus. Its 2024 earnings projection was also reduced by 16% to $2.32 a share.

The bank added last night: “While it is difficult to see a near-term catalyst for electric vehicle sentiment to improve, if/when it does we believe investors will look to Tesla for exposure.”

Source: TradingView. Past performance is not a guide to future performance.

Last night's year-to-date decline of 31.8% meant Tesla shares overtook Boeing Co (NYSE:BA) as 2024’s weakest S&P 500 stock, leaving the Elon Musk-run company back where it was in May last year.

The headwinds facing Tesla should not come as a total surprise to UK investors, many of whom have exposure through the 3.5% holding of Scottish Mortgage Ord (LSE:SMT) Investment Trust.

As we reported in September, this year was always likely to be a transitional one ahead of the launch of a next generation platform for a smaller and more affordable model.

Tesla added in January: “Our company is currently between two major growth waves: the first one began with the global expansion of the Model 3/Y platform and the next one we believe will be initiated by the global expansion of the next-generation vehicle platform.”

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The pressure has increased, however, as electric vehicle demand has decelerated in key markets amid a renaissance for hybrid vehicles. The China market is also over-supplied, leading to a barrage of price cuts that analysts expect will persist throughout 2024.

Morgan Stanley added this month: “While Tesla may be the most technologically advanced car company in the world, its product line-up may be the oldest of any major OEM, with nearly all its line-up launched prior to Covid.”

The bank, which has lowered its target from $345 to $320, expects first-half results to miss profit expectations and for Tesla to pull back on price cuts to defend margins and cash flow.

Despite the bearish sentiment, the bank has reiterated its “Overweight” rating and pointed out that Tesla is both an auto stock and an energy and AI/robotics company.

It said its valuation of the core auto business represents just 21% of its $320 price target.

The bank added: “Negative developments in the global EV market very much matter to Tesla and should reasonably have a negative near-term impact on the price of the stock.

“At the same time, however, we believe investors should not ignore the continued developments of Tesla’s other plays, many of which are auto-related and other areas that we do not include within our $320 target.”