Updated at 8:35 amEDT
tesla (TSLA) Shares fell to a 10-month low on Wednesday, extending their year-to-date decline to more than $240 million, after analysts warned that headwinds in the global electric vehicle market could put risk its status within the so-called 7 Great technology stocks. .
Tesla shares have fallen more than 32% over the past six months and are down more than 56% from their all-time high in November 2021, as the automaker continues to face increased competition in major markets while pursuing a strategy of price reduction designed to maintain its global leadership in electric vehicles.
CEO Elon Musk's strategy, explained to investors last year, has added significant pressure to its profit margins. That decline came even as delivery totals hit an all-time high of 484,507 units during the final quarter of last year and a record 1.81 million for all of 2023.
Musk also told investors in January that profit margin expansion would be tied to central bank interest rate cuts and did not provide firm revenue guidance for 2024.
Tesla posted fourth-quarter net income that more than doubled what it was a year earlier, but a good chunk of it was tied to a $5.9 billion deferred tax gain. Meanwhile, costs linked to artificial intelligence projects and the delay in the launch of the Cybertruck deeply affected its results.
Is Tesla at risk of losing Magnificent 7 status?
Tesla itself warned investors that vehicle delivery growth rates would be “noticeably lower” than 2023 levels.
Weaker-than-expected sales figures in China, where volumes last month fell to the lowest levels in more than a year, are also adding to overall pressures on Tesla's aggressive delivery targets.
Wells Fargo analyst Colin Langan sees more trouble ahead, citing the challenge of declining demand for electric vehicles in the face of further price cuts. He lowered his rating on Tesla shares to underweight in a client note published Wednesday.
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“We see downside risk to volume as price cuts are having less and less impact,” Langan said as he cut his Tesla price target from $75 to $125 per share. “We see headwinds from disappointing deliveries and further price cuts, which are likely to lead to negative earnings.” reviews.”
“We expect volumes to remain stable in 2024 and to decline in 2025,” he added. “In the wake of the (price) cuts, there are lower lease residuals, unhappy customers and the potential loss of premium for luxury brands.”
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Langan also hinted at the likelihood of Tesla losing its status as a member of the so-called Magnificent 7, a group of the biggest tech and tech-adjacent stocks that have captured most of Wall Street's attention.
Tesla, he notes, trades at a multiple of 58 times the consensus estimate for 2024 earnings, nearly double the 31 times of its Magnificent 7 peers.
“TSLA growth in core markets has moderated, with the EU and China stagnant and the US down since Q2 (last year),” Langan wrote. “More worrying is that the effect of the price cuts is moderating, with volume in the second half increasing by just 3%.” (half more than half) even though prices have dropped 5% (over the same period).”
Wedbush analyst Dan Ives, however, maintains that Tesla stock is “going way overboard on” the negative front “and sees the demand story” in stabilization mode heading into the remainder of 2024.
“In the near term it won't be roses and rainbows with slow (first-quarter) demand,” said Ives, who has an outperform rating and a $315 price target on the stock.
“That said, we think the risk/reward is extremely compelling at these levels with the ai story and (self-driving technology) making big strides at Tesla and, in our view, represents a valuation that could exceed $1 trillion. dollars in the next chapter. Part of Tesla's growth story is playing out in the field,” Ives said.
Tesla shares fell 2.65% in premarket trading to indicate an opening price of $172.80 each, a move that would extend the stock's year-to-date decline to around $30. %.
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