While price cuts and falling margins added up to Wall Street's main Tesla (TSLA) concern throughout 2023, many investors entered the new year hopeful that the cuts were, at the very least, almost finished.
But it seems Tesla is not quite there yet; the company last week revealed more price cuts on certain models in the U.S. that are expected to run through February.
Prices of the Tesla Model Y have tumbled more than 21% in the past year, according to Kelley Blue Book, falling from around $63,000 in January of last year to less than $50,000 in January of 2024.
CEO Elon Musk said the price cuts come as Tesla's answer to "the essential quandary of manufacturing: Factories need continuous production for efficiency, but consumer demand is seasonal."
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Musk has previously said that affordability is Tesla's primary challenge and focus, and has defended the price cuts as a necessary maneuver to entice consumers into purchasing a car.
Analysts have criticized the approach, calling it "value destructive."
"In essence, Tesla is training its customers to wait for a deal," the Future Fund's Gary Black said last month.
The stock, down more than 20% for the year, has been struggling as investor sentiment has been waning.
Related: Tesla bull calls company's latest move 'value destructive'
Morgan Stanley: The bears outnumber the bulls 2:1
In a recent note, Morgan Stanley analyst Adam Jonas highlighted the results of a survey he conducted in which 60% of respondents expect Tesla shares to underperform the S&P 500 throughout 2024, while only 26% expect the stock to outperform the index.
Jonas added that 75% of respondents believe Tesla shares have yet to bottom out for the year; nearly 30% believe that the stock will bottom at or below a share price of $100.
"Bearish respondents outnumbered bullish responses by more than two to one," Jonas said.
Less than a quarter of respondents currently see Tesla as a strong way to invest in artificial intelligence.
"From our recent conversations with investors, Elon Musk is seen as making some effort to distance Tesla from the AI theme for 2024, allowing investors to focus on the deteriorating EV demand narrative," Jonas wrote, maintaining his $345 price target.
Black doesn't expect that sentiment to improve anytime soon.
Related: Top Tesla bull says it's too early to include this key area in its valuation
Analyst: Tesla will be stuck at current levels
"At $194 and Tesla trading at 63x 2024 EPS, we expect Tesla to trade in its recent $180-$210 range until investors see evidence that auto gross margins have bottomed and the destructive price cuts of 2023 won’t repeat," Black wrote in response to the note.
He added that, as of yet, there is no clear value to be derived from Tesla's work in developing its pending robotaxi model, or its work in developing its humanoid robot Optimus, noting that many investors have based their "sky-high" valuations on both the robotaxi and the Optimus robot.
Ark Invest CEO Cathie Wood, for instance, expects Tesla to be trading at $2,000 per share by 2027, a valuation that Ark has said is based on Tesla's work in robotaxis.
Black expects Musk "to learn from last year’s mistakes and adopt a longer-term view about how to grow volume with less dependence on price cuts and greater focus on education and communications that convince ICE owners to convert to EV."
His Tesla price target is $290.
Shares of Tesla were mostly flat Wednesday afternoon, trading at around $194.
Contact Ian with AI stories via email, ian.krietzberg@thearenagroup.net, or Signal 732-804-1223.
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