/shutterstock_2394150809.jpg)
The electric vehicle (EV) industry is experiencing significant growing pains in 2024, and even previously undisputed market leader Tesla (TSLA) is feeling the sting. As concerns over lack of supply have shifted to concerns over flagging consumer demand, the ongoing EV price war has compressed margins industry-wide. Unable to keep up with the constant cash burn, some EV startups are even folding altogether.
As for Tesla specifically, investors and analysts alike were unimpressed by the company's forecast for slower volume growth this year, as well as the uncertain timeline for the new model launch that's expected to drive future upside. Plus, amid a slowdown in the Chinese economy, hometown rival BYD (BYDDY) is starting to eat Tesla's lunch on the mainland.
Add to that even more outspoken antics by CEO Elon Musk, alongside a suspected arson incident at Tesla's German plant last week - and the former “Magnificent 7” standout stock is now widely considered to be the outcast among Wall Street's mega-cap leaders.
Here's a closer look at where TSLA stock stands now, and what analysts are saying about where it's headed next.
Tesla Stock Sells Off
Tesla (TSLA) has experienced a significant decline in 2024, even as the broader market has continued to push higher.
After more than doubling in value during 2023, TSLA has given up more than one-third of its value on a YTD basis, off 34.2% as of this writing. That's enough to make Tesla the worst-performing stock in the S&P 500 Index ($SPX) for 2024 so far.
Year-to-date, Tesla has shed roughly $269 billion in market cap - which is equal to roughly the entire market value of Netflix (NFLX), for perspective.
That said, the stock now trades at a relative bargain, by some metrics. The shares are priced at 4.72 times forward earnings, which is a nearly 50% discount to the stock's historical valuations. However, it's still a hefty premium to rivals like Toyota Motor (TM), at 1.05x sales, that are expected to benefit from an increased trend toward hybrids over fully electric vehicles.
In fact, many experts now debate whether Tesla's valuation should be reconsidered entirely, and its tech-style premiums readjusted to fall more in line with other auto stocks - particularly after Musk indicated earlier this year that progress on artificial intelligence (AI) and robotics at Tesla may hinge on the size of his voting stake.
Already, analysts have been adjusting their ratings on TSLA - and some of the comments have been harsh.
What Do Analysts Expect for TSLA Stock?
Last week, Wells Fargo analyst Colin Langan downgraded Tesla stock from “equal weight” to “underweight,” and slashed the price target to $125 per share from $200. That target implies expected downside of 23.5% to Friday's close.
In a note to clients, Langan cited “downside risk to volume as price cuts are having a diminishing impact,” and “headwinds from disappointing deliveries & more price cuts, which likely drive negative EPS revisions” as catalysts behind the negative note.
That downgrade followed a fairly scathing note from Evercore analyst Chris McNally, who wrote Monday that “Tesla increasingly is a ‘2027 story,’” after a tour of the Gigafactory failed to inspire optimism over the automaker's progress on its cheaper, next-gen model. McNally rates TSLA a “hold.”
Also in the bearish camp is Bernstein's Toni Sacconaghi, who just reiterated a “sell” rating with a price target of $150. It's worth highlighting here that the Bernstein expert was right on time to this TSLA story; back in December, Sacconaghi said a TSLA short was his best idea for 2024, and called for 40% downside over the next 12 months. From here, Tesla stock only needs to fall another 8.3% to live up to the analyst's low expectations.
Despite these negative notes, some analysts still maintain a bullish outlook on Tesla. Dan Ives took up the bull case last week, with the Wedbush analyst arguing that the stock's sell-off seems overdone.
“We believe the risk/reward is extremely compelling at these levels with the AI story and [full self-driving] making major strides at Tesla and in our opinion represents a valuation that could exceed $1 trillion as this next chapter of the Tesla growth story plays out in the field,” wrote Ives, who has an “Outperform” rating and $315 price target. That's a premium of 92.6% to Friday's close.
The only analyst with a higher price target? That's Adam Jonas of Morgan Stanley, weighing in at $320. The analyst trimmed his forecast from $345 earlier this month, but still rates the stock “Overweight." Despite concerns about the EV business, Jonas wrote, “Our thesis on Tesla is that it is both an auto stock + an energy, AI/robotics company.”
The consensus among analysts reflects this ambivalence, with the consensus rating down to a “hold” right now from “moderate buy” two months ago. However, the mean price target of $214.31 indicates expected upside of about 31% from Friday's close.
Priced at 37.58 times projected 2025 earnings and 3.92 times expected 2025 sales, Tesla may look appealing to some bargain-hunting investors right now. That said, the shares may be best reserved for investors who can tolerate a higher-than-usual level of volatility.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
