Apr 18 2024: Tesla’s stock has hit a 15-month low in premarket trading following a downgrade by Deutsche Bank, citing significant risks related to the company’s strategic shift and autonomy ambitions.
Deutsche Bank’s Downgrade and Concerns
Deutsche Bank downgraded Tesla Inc (NASDAQ:TSLA) from Buy to Hold, revising the price target down to $123 from $180 per share. The bank highlighted risks associated with Tesla’s aggressive pursuit of autonomy, particularly noting concerns about the delayed Model 2 launch and the focus on Robotaxi.
The bank had previously warned about downside risks related to Tesla’s deliveries, pricing, and earnings outlook through 2025. However, their longer-term Buy rating was contingent on Tesla introducing a next-gen vehicle priced at $25k by late next year, which they believed would drive volume, margins, and free cash flow growth.
Implications of the Model 2 Delay
Deutsche Bank expressed concerns that delaying the Model 2 launch could exert significant pressure on Tesla’s earnings and free cash flow projections for 2026 and beyond. They noted that this delay would likely impact Tesla’s consumer lineup and potentially lead to downward revisions in earnings estimates for the future.
Market Reaction and Analyst Views
Tesla’s stock, trading at $153.32 per share in premarket, marked its lowest level since April 2023, with initial lows resembling those from January. Wells Fargo analysts anticipate a Q1 miss from Tesla, citing weak deliveries. UBS, in a recent note, maintained a Neutral rating, pointing out plateauing electric demand and increased competition from China as potential growth inhibitors.
UBS’s survey results indicated negative momentum for Tesla in China compared to local electric vehicle brands. Additionally, interest in autonomous driving features in the U.S. remained flat year-on-year, with price adjustments seen as necessary for higher adoption rates.
