Tesla (TSLA) stock has rallied nearly 93% in the past year, mainly due to strong expectations from the company’s Robotaxi and the optimism that CEO Elon Musk’s close ties with President-elect Donald Trump will be beneficial for the electric vehicle (EV) maker. However, in contrast to investors’ positive sentiment, most analysts are wary of the stock’s growth potential due to several challenges, including subdued EV demand and weak fundamentals.
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Earlier this month, Tesla announced a 1.1% fall in its 2024 deliveries amid macro pressures and intense competition in the EV space.
Analysts Concerned About the Road Ahead for Tesla
On Wednesday, Wells Fargo analyst Colin Langan reiterated a Sell rating on Tesla stock with a price target of $125, saying that fundamentals are weak. Moreover, he thinks that the potential Inflation Reduction Act (IRA) repeal could be a significant risk to Tesla’s demand and margins this year.
He added that investors should be cautious about the $700 billion valuation assigned to Tesla’s CyberCab and Optimus humanoid robot. Moreover, Langan expects the challenges in Model 3 and Y sales trends to continue this year, given the fading benefits related to price cuts, the possible U.S. repeal of tax credits for clean vehicles, and intense rivalry in China. He is unsure if the Model Y revamp and the new models will be enough to offset this unfavorable trend.
Meanwhile, Barclays analyst Dan Levy increased the price target on Tesla stock to $325 from $270 but maintained a Hold rating. The analyst believes that investors are excited about Tesla’s autonomous vehicles (EV) and artificial intelligence (AI) opportunity and Elon Musk’s strong stature following the U.S. presidential elections. However, Levy contends that Tesla stock has become “untethered from fundamentals,” just like how it traded in late 2021 when the market was influenced by the buzz around EVs.
Earlier this month, Bank of America analyst John Murphy downgraded Tesla stock to Hold from Buy but raised the price target to $490 from $400. Murphy thinks that positive catalysts for future growth, mainly Robotaxi, have been “more fully recognized,” and execution risk remains high.
Is TSLA Stock a Buy, Sell, or Hold?
Overall Wall Street is sidelined on Tesla stock, with a Hold consensus rating based on 13 Buys, 12 Holds, and nine Sell recommendations. At $329.63, the average TSLA stock price target implies a downside risk of 23% from current levels.
Conclusion
While Tesla bulls are optimistic about the stock’s long-term growth potential, its AV technology, Robotaxi, and AI opportunities, other analysts remain cautious due to several reasons, including the stock’s lofty valuation and weak fundamentals.
