Wall Street analyst Toni Sacconaghi from Bernstein Research just put out a report on electric vehicle (EV) leader Tesla (NASDAQ: TSLA), and he's not optimistic about the direction of the stock. Sacconaghi maintained the equivalent of a "sell" rating on Tesla shares while dropping his firm's price target from $150 to $120 per share.
The stock has already dropped 27% year to date. If the analyst is proven correct, it still has another 33% to drop over the next 12 months or so. Yet shares were rising Tuesday morning nonetheless.
NASDAQ: TSLA
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Will self-driving vehicles save Tesla?
The stock was rising Tuesday after Tesla CEO Elon Musk seemed to be putting more emphasis on the company's autonomous driving technology. Musk is pushing the company's latest version of its Full Self Driving (FSD) software. Tesla will offer customers a free month of FSD seemingly to try and display its advantages. The service normally costs $199 per month.
However, investors have been more focused this year on the potential for Tesla's unit sales growth to slow significantly. Bernstein's Sacconaghi decreased his first-quarter delivery projection from 490,000 units to just 426,000. That would barely beat the nearly 423,000 vehicles it delivered in the first quarter of 2023. The analyst also cut his estimate for 2024 full-year deliveries to below 2 million units from 2.1 million units.
The reductions come from what he calls "soft" demand in the important Chinese and European markets. Sacconaghi also noted "constrained" Model 3 production in the U.S. He also cut his firm's earnings per share (EPS) estimate for 2024.
A slowdown in Tesla's growth in 2024 relative to the past two years appears inevitable. But Musk is counting on reestablishing that growth by showing off the company's leading technology. Investors should pay attention to how customer adoption of FSD progresses. That could go a long way in determining if the stock really does have another 30% downside or not.
