(BFM Bourse) – Tesla’s plunge has continued in recent weeks, and analysts are generally doubtful about a recovery in the company’s stock.
We don’t know who really has the authority to decide whether Wall Street’s “Magnificent Seven” (Apple, Microsoft, Nvidia, Amazon, Meta, Alphabet and Tesla) deserve to be reduced to six, five or four. But in an editorial published this Thursday, Bloomberg estimates that there are now only six.
The fault is Tesla, which plunges by 34.8% over the whole of 2024, erasing more than $270 billion in market capitalization since January 1. The electric vehicle specialist lost 4.5% on Wednesday on Wall Street, fell another 4.4% this Thursday around 5:15 p.m., and fell to 15th largest capitalization in the world, overtaken in recent days by Novo Nordisk, Visa , Broadcom, and JP Morgan.
The plunge of the company led and co-founded by Elon Musk can be explained by a multitude of elements. Tesla is facing intense competition from Chinese players, with BYD in the lead, particularly in China, which has led it to reduce its prices multiple times. In the last quarter of 2024, BYD also became the leading manufacturer of electric vehicles in the world, ahead of the Californian group.
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A first quarter below expectations?
More broadly, the plunge in Tesla shares illustrates the market’s recent disenchantment with electric vehicles. Investors are now scalded by the lower margins in this technology than in thermal, but also by the slowdown in its growth, caused by the reduction or elimination of subsidies which make electric vehicles less affordable for households.
Tesla itself noted this slowdown, admitting that in 2024 its growth rate could be significantly lower than that of 2023 (38% for deliveries). Previously, the group expected to increase its sales by 50% per year…
More recently, the group’s action suffered from the weakness of its deliveries to China in February as well as the suspension of production at its site near Berlin following an arson.
If the fall in Tesla shares raises questions, analysts do not perceive an entry point for the stock, quite the contrary. In recent days, a number of design offices have slashed their price targets for the car manufacturer.
Deutsche Bank, although buying the stock, went from 250 dollars to 218 dollars on Monday. The German bank warned that the electric auto group would likely disappoint consensus expectations in the first quarter. Quoted by investing.com, the establishment only anticipates 427,000 deliveries over the first three months, which would mark an increase of barely 1% compared to the same period of 2023.
The bank fears that the group’s margins will find themselves under pressure, due to tensions on prices and volumes, with Deutsche Bank only counting on 1.96 million vehicles delivered in 2024 against a consensus of 2.1 million.
Morgan Stanley, although also positive on the action, also lowered its target to 320 dollars from 345 dollars last week. According to Yahoo Finance, its analyst, Adam Jonas, believes that if there is ever a time when Tesla could show an operational loss in its automobile business, it is this year.
A long list of fears for UBS
Wells Fargo, for its part, lowered its advice on Wednesday to “underweight” and its target from $200 to $120, which implies a drop in the stock of around 27% compared to the current price. The American bank is concerned about the weakening impact of the manufacturer’s price reductions on demand for its electric vehicles, indicates Reuters.
UBS joined the list this Thursday. The Swiss bank lowered its price target to $165 from $225 previously, while remaining at “neutral”. She also expects Tesla deliveries to be lower than expected for the first quarter, at 432,000 units, against a consensus of 477,000, just like for the whole of 2024 (1.96 million against 2.06 million for the consensus).
The bank also revised downwards its forecasts for 2025, 2026 and 2027, to 2.2 million, 3 million and 3.9 million units respectively compared to 2.6 million, 3.2 million and 4 million previously.
This revision is due to the slowdown in demand in Western countries, intense competition in China and a limited contribution to the volumes of the Model 2 in 2025, the group’s future entry-level electric car, with a price mentioned at 25,000 dollars.
The Swiss bank lists a fairly long list of concerns about Tesla. In addition to the loss of speed in demand for electric vehicles and competition in China, she emphasizes that the acceleration of volumes will depend on the Model 2 which risks arriving late on the Chinese market. “The Model 2 may do well in Europe, but the affordable electric vehicle landscape may be more competitive than when the Model 3 arrived in the region,” adds UBS.
According to the establishment, the growth in margins would be dependent on its advanced driving assistance system FSD (full self-driving), software sold by the group. However, “for the moment, it is essentially an American product” and “we believe that Tesla may have to reduce FSD prices to achieve higher penetration rates, in particular for the adoption of the model 2, whose price is lower”, underlines UBS.
The Swiss bank also fears that Elon Musk will develop his artificial intelligence and robotics technologies outside of Tesla, a threat that the manager has made half-heartedly. The billionaire declared in mid-January that he was not “comfortable with the idea of making Tesla a leader in artificial intelligence (AI) and robotics without having around 25% of the voting rights ” of the company (he currently has 13% of the capital).
Wedbush still optimistic
Overall, according to Bloomberg data, 34% of analysts covering Tesla recommend buying the stock compared to more than 60% at the start of 2023.
Among the most positive of them are Dan Ives, analyst at Wedbush and a great optimist in the face of the eternal on American tech. “We believe the Tesla story is as negative as it has been in recent years, with Musk and Tesla under attack from bearish investors on all sides,” he wrote in a note Wednesday.
“That said, we believe the risk/reward is extremely attractive at these levels, with the story of AI and FSD making major strides at Tesla and, in our view, representing a valuation that could exceed 1,000 billion dollars as the next chapter of Tesla’s growth story unfolds on the ground,” adds Dan Ives.
The analyst estimates that vehicle deliveries for the group ranging from 2.1 million to 2.2 million units in 2024 are still within Tesla’s reach, even if they only amount to 430,000 in the first quarter.
Julien Marion – ©2024 BFM Bourse
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