Tesla (TSLA 15.31%) released its production and delivery numbers for the first quarter on April 2, which fell short of already low expectations. Despite the fact shares are already down about 60% from their previous peak, analysts at Bernstein believe the stock could have even more downside.
The firm sees weak vehicle deliveries putting pressure on Tesla's profits this year. Bernstein has an underperform rating on the stock and kept its Mar. 26 price target of $120, or 29% below the current share price of about $170.
Why Tesla stock could hit new lows
Tesla's Q1 vehicle deliveries of 386,810 came in significantly below the analyst consensus of 443,000. The reaction to the company's update has been widely negative on Wall Street, but Tesla executives had previously cautioned investors about a slow year ahead. CEO Elon Musk has been warning investors since last year about the impact of rising interest rates on vehicle sales, since most car buyers finance their purchase with monthly payments.
Another factor that could weigh on the company's performance this year is the transition to the next-generation manufacturing platform. Tesla CFO Vaibhav Taneja mentioned on the fourth-quarter earnings call in January that as the team prioritizes this transition, it will pressure volume growth in 2024.
Is Tesla stock a buy, sell, or hold?
Tesla ended 2023 with more cash on its balance sheet than debt and a higher profit margin than several of the largest auto manufacturers, so it can withstand a rough patch. The stock is behaving predictably -- it usually falls on weak deliveries while rocketing higher during periods of growing demand. Long-term investors can use that pattern to their advantage.
The shares may hit new lows this year as Bernstein's analyst predicts, and Tesla is unlikely to see booming electric vehicle sales again until interest rates settle down. But the company has major growth initiatives in the works, and the stock could be worth buying for patient investors with a long-term mindset.
