Like a Collapsed Train... Tesla's Stock Plummets by Double Digits

Warnings Pour In from Wall Street Amid Earnings Announcements...

"Like a derailed train." Amid concerns over slowing electric vehicle demand, Wall Street warnings are pouring in around Tesla, which reported results below expectations. Tesla's stock price plummeted double digits in a single day amid investor disappointment.

On the 25th (local time) in the New York stock market, Tesla's stock was trading at around $182.1 per share, down more than 12% from the previous close as the market neared closing.

This decline is due to the quarterly earnings and future guidance released after the previous day's close falling short of market expectations, coupled with the company's pessimistic outlook that "the sales growth rate in 2024 could be significantly lower." If Tesla's stock closes at the current level, it would mark the worst day since a 21% plunge on September 2020. Tesla's stock has already dropped more than 26% so far this year.

In particular, Wall Street is expressing strong concerns not only about the poor performance and halved operating profit margin but also because CEO Elon Musk did not specify growth targets such as annual delivery volumes. It is considered unusual that Tesla, which had presented an average annual growth rate of 50% for several years until last year, did not disclose an annual delivery target.

Dan Ives, a well-known Wall Street analyst and a prominent Tesla bull at Wedbush, likened Tesla's earnings announcement the day before to a "train wreck." He had expected CEO Musk and the management team to provide responsible answers regarding the recent outlook for slowing electric vehicle demand, price cuts, and the resulting profit structure, but said, "We were wrong," and described it as "like a derailed train."

Furthermore, analyst Ives predicted that Tesla's margins would decline further as price cuts continue. Accordingly, he lowered Tesla's 12-month target price from $350 to $315. This contrasts with the optimistic outlook earlier this month, when despite overall concerns about slowing electric vehicle demand, Tesla's demand was considered solid.

Barclays also lowered Tesla's target price by about 10% to $225 per share. In an investment memo released that day, the firm said, "It's not as bad as feared," but expressed concern that "downside risks are increasing." UBS also lowered its target price to $225 and recommended a wait-and-see stance, stating, "There is little reason for investors to buy more Tesla shares." RBC lowered its target price slightly from $300 to $297 per share. Goldman Sachs, fearing short-term headwinds, set a target price of $220 per share.

The current median 12-month target price suggested by Wall Street is understood to be $225 per share. Major foreign media reported that at least nine institutions have downgraded their investment opinions on Tesla. The fact that Tesla's current stock price is trading at about 60 times its 12-month earnings estimate is also cited as a factor limiting further upside potential. TD Cowen diagnosed, "Tesla's news has shifted from 'bad' to 'worse.'"

However, buy recommendations still remain. Morgan Stanley maintained a "buy" rating with a target price of $345. Ben Barringer, an analyst at asset management firm Quilter Cheviot, predicted that macroeconomic factors such as future interest rate cuts could increasingly work in Tesla's favor.