JPMorgan’s recent analysis paints a bleak picture for Tesla stock, suggesting that the electric vehicle (EV) manufacturer may be in for a challenging period ahead following its significant first-quarter delivery miss. With Tesla reporting vehicle deliveries of 386,810 for the first quarter, notably below Wall Street estimates of approximately 450,000, concerns about the company’s growth trajectory have intensified.
As a result of this disappointing performance, JPMorgan has reiterated its “underweight” rating on Tesla and slashed its price target from $130 to $115, indicating a potential downside of 31% from current levels. This downward revision comes on the heels of Tesla’s stock already plummeting 60% from its record high in 2021. According to JPMorgan analyst Ryan Brinkman, even with this substantial decline, Tesla’s valuation remains demanding and may not adequately reflect the challenges ahead.
Brinkman attributes Tesla’s sales woes to waning demand and intensifying competition in the EV market. He suggests that investor patience with the company may be wearing thin, particularly after a three-year downturn in performance. The significant gap between analyst expectations and Tesla’s actual vehicle sales in the first quarter, with estimates once forecasting 626,000 vehicle sales compared to the reported 387,000, underscores the magnitude of the miss and the potential erosion of investor confidence.
Various factors, including the rise of hybrid cars, supply disruptions at Tesla’s factories, and fierce price competition from Chinese automakers, have contributed to the company’s struggles. Brinkman warns that these risk factors are unlikely to abate soon, posing challenges for Tesla in maintaining its premium valuation. He cautions that failure to swiftly restore unit volume and revenue growth could result in further declines in Tesla’s stock price.
Of particular concern to Brinkman is Tesla’s deteriorating profitability, exacerbated by multiple vehicle price cuts over the past year that have squeezed profit margins. This trend could exert additional pressure on the company and its investor base, potentially prompting a reassessment of Tesla’s ambitious goals, such as fully autonomous cars and humanoid robots, in favor of prioritizing the profitability of its core auto business.
With first-quarter deliveries contracting and the prospect of negative automotive and total company revenue, Brinkman anticipates a sobering reality check for even the most bullish investors. The analysis from JPMorgan underscores the formidable challenges facing Tesla as it navigates a competitive and rapidly evolving automotive landscape.