Shares of electric vehicle (EV) maker Tesla (NASDAQ:TSLA) have advanced 10.5% and rallied 90% year-to-date. However, several headwinds, like high interest rates, growing competition, Cybertruck issues, and margin pressure, could limit the upside in the stock over the near term, as reflected in Wall Street’s average price target.
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Analysts See Multiple Headwinds
Tesla disappointed investors with its third-quarter results, with both revenue and earnings falling short of analysts’ expectations. Moreover, CEO Elon Musk cautioned 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 price cuts to boost volumes amid intense competition in the EV market. Additionally, Musk said that the much-delayed Cybertruck would not generate significant cash flow for 12 to 18 months after production commences.
On Monday, Jefferies analyst Philippe Houchois lowered the price target for TSLA stock to $210 from $250 and reiterated a Buy rating. The analyst thinks that canceling Cybertruck would probably be positive for Tesla shares. “With 2024 already a lost year for growth, it would help Tesla refocus on an edge that was built on simplicity, scale and speed,” said Houchois.
The analyst contends 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 thinks the market is too optimistic on 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 businesses like full-self driving (FSD), Dojo supercomputer, and Optimus humanoid robot by 2030. That said, he noted that the expected cost of capital for these businesses would be well above the group average due to the regulatory and technological challenges involved.
Tyndall also raised concerns about the timing of delivery, given Tesla’s ambitious goal to sell 20 million EVs by 2030 year-end.
Is Tesla a Buy or Sell?
Overall, Wall Street is sidelined 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 5.6% upside potential.
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 growing competition and the delay and costs related to Cybertruck. These concerns, along with the ongoing macro pressures, could limit the upside in Tesla stock.
