Shares of electric vehicle (EV) maker Tesla (NASDAQ:TSLA) advanced 10.5% and grew 90% year to date. However, several headwinds, such as high interest rates, increasing competition, Cybertruck issues and margin pressure, could limit the stock’s upside in the near term, as reflected in Wall Street’s average price target.
Analysts See Multiple Headwinds
Tesla disappointed investors with its third-quarter results, with both revenue and earnings falling short of analysts’ expectations. Additionally, CEO Elon Musk warned about the impact of the state of the economy and high interest rates on EV affordability.
The company’s results confirmed the fears of several analysts about the continued decline in Tesla’s operating margin due to aggressive pricing to increase volumes amid intense competition in the EV market. Additionally, Musk said the much-delayed Cybertruck won’t generate significant cash flow for 12 to 18 months after production begins.
On Monday, Jefferies analyst Philippe Houchois lowered the price target for TSLA stock to $210 from $250 and reiterated a Buy rating. The analyst believes that canceling Cybertruck would likely be positive for Tesla stock. “With 2024 already a lost year for growth, it would help Tesla refocus on an edge that was built on simplicity, scale and speed,” Houchois said.
The analyst claims that instead of spending significant resources on the Cybertruck production ramp, management should focus on high-volume global segments and the supply of 4680 battery cells for Model Y.
Earlier this month, HSBC analyst Michael Tyndall initiated a Sell rating on Tesla with a price target of $146. The analyst believes that the market is overly optimistic about Tesla and that a “fair degree of hope” is already priced into the stock.
The analyst’s valuation model for Tesla factors in the success of its ventures such as full self-driving (FSD), Dojo supercomputer and Optimus humanoid robot by 2030. That said, he noted that the expected cost of capital for these ventures would be much more tall the group average due to the regulatory and technological challenges involved.
Tyndall also expressed concerns about the timing of delivery, given Tesla’s ambitious goal of selling 20 million EVs by the end of 2030.
Is Tesla a Buy or Sell?
Overall, Wall Street is bearish on Tesla stock, with a Hold consensus rating based on 14 Buys, 13 Holds and six Sells. The average price target of $247.29 implies a 5.6% upside potential.
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Conclusion
Tesla bulls continue to be bullish on the company due to its dominant position in the EV space and cutting-edge technology. However, several analysts are concerned about certain aspects, including increasing competition and the delay and costs associated with Cybertruck. These concerns, along with the ongoing macro pressures, could limit the upside in Tesla stock.
Disclosure
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.