$TSLA crushed by $WFC downgrade!
Tesla cont’d tumble.
On Wed, 13 Mar 2024, Tesla shares, opens new tab dropped about -4.54% .
This came about as a result of $Wells Fargo(WFC)$ raising concerns over the waning impact of price cuts by the world's most “valuable” automaker on demand for Tesla’s electric vehicles and downgraded them to "Underweight".
Wells Fargo's scathing comment that “the electric vehicle maker is a growth company with no growth" did not help either.
Tesla is battling a global slowdown in EV demand following last year's price war, started by none other than the man behind Tesla.
As said many times over:
- It hurt margins.
- Tarnished brand equity.
- Result in loss of nearly $200 Billion in market value as its shares slumped nearly -31.78% YTD..
Wells Fargo the brokerage also slashed Tesla's price target from $200 to $120.
This is one of the lowest on Wall Street and implies a further decline of -29.2% downside to stock's last closing price of $169.48 per share (as of 13 Mar 2024 closing).
Falling revenue growth YoY.
Investor concerns over the company's prospects have been high since CEO Elon Musk in January 2024 warned that growth would be "notably lower" in 2024. (see above)
Mag 7 - Weakest link.
- Tesla has lagged other "Magnificent Seven" stocks including $Microsoft(MSFT)$ , Apple, Nvidia, Amazon, Alphabet, and Meta Platforms in 2024. (see above)
- Zoom in on the graph line in RED, that will be Tesla.
- Even with the decline, Tesla still has the highest forward price-to-earnings ratio (P/E) of 52, compared to the average of about 31, amongst the Magnificent 7 Price Return index.
This is not a good sign btw.
Positivity despite headwinds?
Based of LSEG past 30 days’ data, their average estimate for Tesla earnings in 2024 has dropped by about -10.8%.
Still, the average Wall Street rating for Tesla is "Hold" as many analysts believe that the demand slump could stabilize later in the year.
Wedbush’s Dan Ives on Wednesday expressed his view that:
- The demand story for EVs globally has clearly moderated.
- However, he believes Tesla is on the broader trajectory to see growth and margin improvement return to the story over the coming quarters.
- Now is not the time to throw in the towel on Tesla.
- May be, Dan is unaware that the Chinese EV market just got “hotter” with a new entrant. (see above)
- It is Chinese mobile phone maker Xiaomi’s foray into the electric vehicle market.
- This is a new story of a Chinese handphone maker “triumph”, while that of Apple’s scrapped.
Question: did Tesla’s share of the Chinese EV pie just got smaller?
The play has just started rolling, the ending to be witnessed.
- Do you think Tesla will fall back to its lowest $113.06 per share (06 Jan 2023)?
- Do you think Tesla’s share of the Chinese EV pie will shrink over time?
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