After a tumultuous start to the year defined by a bearish view of the EV space, the past three months have been excellent for Tesla (NASDAQ:TSLA) investors.
During this period, Tesla shares have surged by 66%, driven by various factors. These include improved fundamentals, as evidenced by Tesla’s beat on Q2 deliveries compared to Wall Street expectations, and Elon Musk securing shareholder approval for his compensation package. Additionally, tge excitement surrounding the upcoming, though now delayed, Robotaxi Day, along with various technical and macroeconomic factors, have helped the EV leader’s case too.
All of these ingredients are ones noted by Barclays analyst Dan Levy. Yet, despite the recent positive sentiment, Levy thinks Tesla’s upcoming Q2 print might force investors to “at least consider still-challenged fundamentals.”
In fact, as is wont to happen, Levy warns that should the results not go Tesla’s way, there will be a reversal of fortune for the stock. And according to the analyst, that is not an unlikely scenario. “Indeed,” says Levy, “2Q may reaffirm continued pressure on margins, even if they are near a trough.”
That trough is set to get lower, according to Levy’s forecast. The analyst expects a Q2 miss on Auto GM%, calling for a 16.0% margin, representing a 2.40bps sequential decline in margin “to new trough.”
On the other hand, given the current excitement on the “AV/AI pivot” that is driving current bullish sentiment, Levy admits that even “clear softness in margins/fundamentals may drive only short-lived pressure.”
Still, fundamentals will count eventually and, on that matter, plenty still needs improving. “While 2024 expectations have largely rightsized, we still see the need for cuts to estimates in the mid-term on weaker volumes, leaving considerable uncertainty around when fundamentals stand to become favorable again,” Levy summed up. “This complicated balance keeps us on the sidelines and underpins our Equal Weight rating on the stock.”
That said, along with keeping that Equal Weight (i.e., Neutral) rating, Levy has also raised his price target from $180 to $225, although the figure still suggests shares will see a downside of ~10% over the coming months. (To watch Levy’s track record, click here)
The Street’s average target is even lower than Levy’s revised objective; at $193.18, shares are expected to lose 22.5% of their value in the year ahead. On the rating front, TSLA’s Hold consensus rating is based on a mix of 13 Buy and Hold recommendations, each, plus 9 Sells. (See Tesla stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
