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Some Analysts Say Recent Selling is Overdone
By
Christiana Sciaudone
:max_bytes(150000):strip_icc()/_DSC0933-dd3d86c424454048a84974e53ac65130.JPG "Tesla Stock Tumbles as Wells Fargo Analysts Call it a 'Growth Company With No Growth' (1)")
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Christiana Sciaudone is a journalist with more than 20 years of experience writing about everything from equities to cryptocurrencies and the business of fashion to environmental issues. Her work has been published in The Wall Street Journal, Associated Press, Vogue Business, Bloomberg and others.
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Published March 13, 2024
:max_bytes(150000):strip_icc()/GettyImages-1494888410-c8b4c4bc55814f31bc437713b8467636.jpg "Tesla Stock Tumbles as Wells Fargo Analysts Call it a 'Growth Company With No Growth' (2)")
Key Takeaways
- Shares of Tesla fell as Wells Fargo said the EV maker is likely to see no sales growth in 2024. The bank cut its rating on the stock to underweight and lowered its price target to $125 from $200.
- Tesla's struggling to sell cars even as it lowers prices in various markets, and that's affecting its profit.
- Not all analysts have soured on Tesla, and some say the recent sell-off is overdone.
Tesla shares moved lower Wednesday morning as analysts at Wells Fargo said the stock "ain't looking so 'Magnificent'" and that the electric vehicle maker is a "growth company with no growth."
The electric vehicle maker, a member of the so-called Magnificent 7 group of tech stocks, was trading at its lowest price in 10 months after Wells Fargo lowered its rating to underweight from equal weight and cut its price target to $125 from $200. Tesla shares, which have shed nearly a third of their value since the start of the year, were down 3.2% at $171.92 at around 11:45 a.m. ET.
The downgrade comes as the overall EV market has cooled and competition has intensified, developments that have led Tesla to announce a series of price cuts to boost demand. Those price cuts are having little effect on Tesla's sales and are pushing down profits, Wells Fargo analysts led by Colin Langan said in a note.
Wells Fargo said that Tesla trades at a premium to its Magnificent 7 peers even as it is likely to show no growth in sales volume this year and a drop next year. The bank noted that its estimates for Tesla's profits in 2024 and 2025 are now 32% and 52%, respectively, below the Wall Street consensus.
Magnificent 7 Stock Performance Over Past Year
:max_bytes(150000):strip_icc()/TSLA_2024-03-13_10-44-25-8dbc6e26d71c404299fd95ed244e32af.png "Tesla Stock Tumbles as Wells Fargo Analysts Call it a 'Growth Company With No Growth' (3)")
Not Everyone Is Sour on Tesla
Not everyone's down on Telsa. Wedbush's Dan Ives believes that negative sentiment toward the company and its chief executive, Elon Musk, is overdone.
"The Tesla narrative is as negative [as] we have seen in the last few years with Musk and Tesla getting attacked by the bears from all directions," Ives said in a March 13 note. "We have been here before with Musk/Tesla a number of times over the last decade as the doubters have said the Tesla story is done and electric vehicles are a fad, not a long term transformational trend that will change the auto industry."
Ives admitted that the Chinese price wars in EVs are "brutal," but said there is a sense that the mania is starting to subside, good news for the industry as a whole. Wedbush said the company should exceed delivery of 2 million units in 2024, although the first quarter is "tracking softly towards the 430k level."
In the fourth quarter, Tesla produced about 495,000 vehicles and delivered over 484,000 vehicles.
According to Morningstar's David Sekera, this year's sell-off in Tesla means it's trading under fair value.
"People are kind of discounting the other potential growth in Tesla right now," Sekera said in an interview last week. "The long term growth story for Tesla is still there."
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