The Tesla stock took another hit on Thursday, dropping by 3.5% to below $150, the lowest it has been since January 2023. This decline followed a downgrade from Deutsche Bank analysts who shifted their recommendation for the stock from a buy to a hold. Emmanuel Rosner, the lead analyst, also cut the price target for Tesla by 35% to $123, anticipating further downside of 19%. The primary reason for this downgrade was Tesla’s shift away from its core electric vehicle business towards the development of robotaxis, an autonomous ride-hailing network. Rosner believes this shift will create significant earnings pressure in the coming years, leading to a high likelihood of delays for Tesla’s less expensive Model 2 car.
Rosner’s cautionary stance on Tesla’s stock is based on the belief that the company’s focus on robotaxis will result in fundamental-hungry investors losing faith due to dwindling financial results amidst an elongated timeline for earnings growth. As a result, Tesla’s share price could face further downward pressure in the future. Year-to-date, Tesla’s stock is down 40%, significantly underperforming the S&P 500 and Nasdaq, which have seen gains of 6% and 7% respectively. The challenges faced by Tesla are not unique, as other electric vehicle stocks like Rivian and NIO are also struggling with demand issues, with their shares down almost 60% and over 50% respectively.
The recent announcement by Tesla’s CEO, Elon Musk, regarding the unveiling of robotaxis on August 8 has raised concerns among analysts like Rosner who believe that the technology may not be ready for deployment. Rosner highlighted the considerable execution risk involved in the development of robotaxis and suggested that the network hitting the road could still be years away. This skepticism surrounding Tesla’s ambitious plans for autonomous vehicles has contributed to the negative outlook on the company’s stock. In response to the challenges faced by Tesla, the company has announced measures to preserve cash, including a significant reduction in headcount.
Overall, Tesla’s stock has been on a downward trajectory in 2024, with the latest downgrade from Deutsche Bank adding to the pressure. The shift in focus towards robotaxis and away from its core electric vehicle business has raised concerns among analysts about the company’s future earnings potential. While Tesla remains a dominant player in the electric vehicle market, the challenges it faces in terms of delivery growth and profit margins have weighed heavily on its stock performance. Investors will be closely monitoring Tesla’s progress in the development of robotaxis and its impact on the company’s financial performance in the coming years.
