For more than two months, we’ve been talking about the dangers caused by Wall Street’s opinion of Tesla (TSLA) shares.
If they were doing their own “Walk Down Main Street,” they would have seen…
- Lower global demand
- The loss of tax credits in the U.S.
- Higher prices on vehicles with lower demand
- Questions about the company’s management
- Most importantly, a stock price that has slipped into a long-term bear market trend
Any three of these five – and there are more – would have several analysts that I know raising their eyebrows and looking under the hood at Tesla’s situation for a potential downgrade.
Well, this weekend we finally saw a little shift in the analyst’s “permabull” outlook.
Last week, Dan Ives (yes, the analyst that is never bearish) lowered his target on Tesla from $300 to $315.
Why? Because the analysts are starting to figure out what you’ve known for a few months… Tesla shares are heading lower.
How much lower? My guess is 40%, as the shares have a long-term target price of $100.
But how does it get there?
This week, we’ll see updated delivery numbers from Tesla. For all intents and purposes, this number may be one of the worst for the EV manufacturer as they may reveal the first sales decline for Tesla in more than four years.
Why is four years significant?
It was about two to four years ago that you had the likes of Rivian (RIVN), Lucid (LCID), BYD (BYD), GM (GM), Ford (F), and others crash the EV scene with their own offerings. This was the point that Tesla started facing the challenges that any other growing company faces… competition.
Moving forward.
That competition – especially from Ford, GM, and BYD – is set to cut more dramatically into Tesla’s future sales.
Combine that with the fact that the tax credit playing field has been leveled as the government has been reducing tax credits for EV purchasers, and you’ve got the first competitive headwind that Tesla has faced since their IPO.
While Wall Street analysts have reduced their outlook on Tesla shares, it’s likely that this is only the beginning of a trend that will park more analysts in the “sell” as they downgrade from “hold,” which is where most analysts currently sit.
I mentioned earlier that this is a slow week for data, except for one data point the entire street will be watching.
Tesla will report that delivery number this week, expected on Tuesday.
We’ll talk about the numbers and stock on Wednesday morning.
About the Author
Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.