Why did Tesla's performance 'fall short' yet its stock price surged?
$Tesla Motors(TSLA)$ 's stock price surged 12% to $162.13 on Wednesday, a day after the company reported its sharpest revenue drop in 12 years, a 55% drop in net profit from a year earlier.
All key indicators missed expectations, but they announced a budget car plan! Wall Street analysts had mixed reactions. Here are the latest analyst views and comments on Tesla stock:
1.Bank of America: More Positive Catalysts Ahead
$Bank of America(BAC)$ analysts upgraded their rating on Tesla from "neutral" to "buy," but maintained a target price of $220. They cited the company's management addressing recent negative catalysts like slowing sales growth, narrowing margins, product launch concerns, layoffs, and high inventory.
At the same time, there are catalysts for reviving the growth narrative and positives, such as production plans to ramp up, plans to launch autonomous taxis in August, cost-cutting measures, and potential licensing opportunities.
Admittedly, the combination of these elements may not change Tesla's long-term path, but the short-term news is starting to look good.
2.Wedbush: Budget Car Plan Must Be Executed Flawlessly
Wedbush analysts maintained their "outperform" rating on Tesla, but lowered their target price to $275 from $300. They credited Musk for finally maturing and being responsible, laying the foundation for Tesla's growth strategy, especially with the confirmed production and delivery plan for a budget car by 2025.
Analysts say Tesla's near-term focus is on sales and deliveries, but the next 10 years will be all about full autonomous driving, which will have a very painful transition period.
Over the next 6 to 12 months, with demand sluggish, Tesla's budget car and plans to drive demand in China must be executed perfectly. Otherwise, the rationale for the stock's rally will fall flat.
3.JPMorgan: Lack of Long-Term Sustainability
$JPMorgan Chase(JPM)$ analysts say Tesla's stock may have recovered recently, but they don't believe its still-elevated valuation is sustainable in the long run.
The Q1 2024 earnings were even worse than already downgraded market expectations, pointing to further downside risks to earnings estimates and valuation compression. Coupled with recent layoffs and slower ramp-up speeds, it might be time to reset Tesla's medium- and long-term growth forecasts.
Analysts are skeptical about Tesla's ability to hold onto its stock rally, but more details on new products could change their view.
4.UBS: Uncertainty Surrounds Budget Car Plan
$UBS Group AG(UBS)$ lowered its target price for Tesla to $147 from $160, citing limited growth potential for existing models and uncertainty surrounding the new budget car plan.
It's not the Model 2 investors were expecting, and there are still many unanswered questions about these new models. Tesla hasn't provided clear answers, so we have to assume the plan is shaky.
UBS says Tesla wants to be seen as a leader in autonomous robotics and AI, but investors might not be buying it. Tesla's stock has already lost more than a third of its value since 2024.
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