The past few months have been rough for Tesla investors as the electric vehicle maker stumbles its way out of an abysmal first-quarter that has sent shares tumbling and left analysts concerned.
Tesla stock has fallen about 39% in 2024, making it one of the worst performers in the S&P 500. Tesla’s market capitalization has dropped to about $470 billion. Before this week, Tesla’s market cap last fell below $500 billion at its previous 52-week low in April 2023.
The company’s value has been driven down by sweeping layoffs and the resignations of two top leaders, poor first quarter sales, and changes in strategy related to a long-promised affordable electric car — the Model 2 — in favor of a self-driving robotaxi.
“We are developing some of the most revolutionary technologies in auto, energy and artificial intelligence,” Tesla CEO Elon Musk wrote to employees Sunday as he informed at least 14,000 people they were being laid off. “As we prepare the company for the next phase of growth, your resolve will make a huge difference in getting us there.”
The slew of news has worried investors. Many analysts are eagerly anticipating new information set to be revealed next Tuesday when Tesla reports full first-quarter earnings. Analysts are looking for Tesla stock to be worth $189 per share, according to a consensus collected by FactSet. As of publication it was at trading at roughly $150 per share.
Here’s what Wall Street is saying.
Wedbush warns of possible ‘dark days’ ahead
Analysts from Wedbush, led by Daniel Ives, on Wednesday wrote that Tesla needs to showcase a clear strategy going forward, including a roadmap for future product launches, calling the last few months a “horror show” for investors. Specifically, Ives said Tesla needs to establish a vision that prioritizes the Model 2, which has been put on ice.
“For Musk, this is a fork in the road time to get Tesla through this turbulent period otherwise dark days could be ahead,” Ives wrote. “With the ongoing debacle around margins and demand, Musk will need to quickly take the reins back in to regain confidence in the eyes of the Street.”
Wedbush has a $300 price target for Tesla stock.
Deutsche Bank warns EV investors may call it quits
Deutsche Bank on Thursday downgraded Tesla stock from a buy rating to a hold rating and lowered its price target from $189 per share to $123 per share. The firm had based its buy rating on hopes Tesla would unleash the Model 2 next year.
Now, Deutsche analyst Emmanuel Rosner wrote, Tesla’s future is tied to “cracking the code on full driverless autonomy,” which represents a “significant technological, regulatory and operational challenge.”
“We view Tesla’s shift as thesis-changing, and worry the stock will need to undergo a potentially painful transition in ownership base,” Rosner wrote Thursday, noting that electric vehicle investors may start “throwing in the towel” and be replaced “by AI/tech investors with considerably longer time horizons.”
Tesla CEO Elon Musk wrote on X Tuesday that “going balls to the wall for autonomy is a blindingly obvious move.”
JPMorgan confirms Tesla has a demand issue
Tesla on Sunday laid off “more than 10%” of its global workforce, or at least 14,000 people. Musk cited the “duplication of roles and job functions in certain areas,” according to a leaked memo to staff. He later wrote on X that Tesla needs to “reorganize and streamline the company for the next phase of growth” every five years.
“[T]he sweeping layoffs announced yesterday, amounting to a reduction in crewed production capacity, should now leave no doubt that the decline in deliveries has been a function of lower demand and not supply,” JPMorgan analysts led by Ryan Brinkman wrote Tuesday.
Tesla sold just 369,784 Model 3 compact cars and Model Y SUVs last quarter and 17,027 other EVs. Overall, sales fell 8.5% compared to a year earlier, marking the Austin, Texas-based company’s first year-over-year decline since the second quarter of 2020.
It also produced fewer vehicles in the quarter than it did during the first three months of 2023, pinning the blame on assembly line updates in California and repeated factory shutdowns in Germany. However, analysts weren’t convinced, and JPMorgan slashed its Tesla price target to $115 from $130 earlier this month.
Morgan Stanley says the battle over Musk’s compensation must end
Morgan Stanley on Thursday wrote that the uncertainty around Musk’s compensation package and his control over Tesla shares is creating “great angst among Tesla investors.”
Tesla asked investors Wednesday to “restore shareholder democracy” by ratifying CEO Elon Musk’s $56 billion pay package that was struck down by a Delaware judge in January. Judge Kathaleen McCormick found that defendants in a shareholder lawsuit, which included Musk and Tesla’s board, failed to meet the burden in proving that “the compensation plan was fair,” writing that the process of deciding his compensation was “deeply flawed.”
Tesla argues that the plan was valid, saying that 73% of shareholders approved the 2018 pay package, according to a proxy statement filed Wednesday. Shareholders will vote on the proposal — among several others — at Tesla’s annual shareholder meeting on June 13.
The company must also resolve Musk’s demands for 25% control of the company before Tesla can pursue greater forays into artificial intelligence and robotics products. Musk founded xAI last July to compete with big names like OpenAI and Google on artificial intelligence technology.
“I am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control,” Musk said on his social media platform X on Jan. 15. “Enough to be influential, but not so much that I can’t be overturned. Unless that is the case, I would prefer to build products outside of Tesla.”
Morgan Stanley’s analysts maintain a $310 price target for Tesla. However, just $62 of that overall target is based on the company’s core electric vehicle business.
Goldman Sachs names Tesla a leader in autonomy
Even as a wave of skepticism surrounds Tesla’s forecasted robotaxi announcement and Musk’s pushes toward autonomous driving, some analysts are showing more optimism.
“The bottom line is that we believe Tesla is among the leaders in autonomy/ADAS technology, and in the long-term we believe that software & digital services can be a meaningful driver of its business,” Goldman Sachs analysts noted on Thursday.
In recent months, Tesla has renewed its public focus on its driver-assistance technology, promising frequent updates and free trials. Musk has also reiterated his offer for other automakers to license Tesla’s Full Self-Driving software, although none have accepted.
Tesla has also slashed the subscription price of the software to $99 per month from $199 per month as it looks to increase its collection of user data. The company has recorded 1 billion miles driven using FSD, with a large spike beginning in September 2023. In 2016, Musk wrote that receiving widespread approval from regulators would require 6 billion miles of FSD data.
“[I]t will take time before Tesla can drive more significant growth in either robotaxi or FSD revenue,” Goldman’s analysts wrote Thursday. The firm has a $175 per share price target for Tesla stock.
Barclays warns many questions will be left unanswered next week
Barclays analysts on Wednesday slashed its Tesla price target by 20% to $180 from $225 and said next week’s earnings report will hurt the stock. Analyst Dan Levy said he expects Tesla to miss Wall Street’s estimates when it reports full first-quarter results on Tuesday and gross margins will likely disappoint investors.
“Tesla’s deeply challenged near-term fundamentals are taking the backseat to a much larger issue, as Tesla is facing an investment thesis pivot,” Levy wrote. “Specifically, the central focus of the call will be to understand Tesla’s forward strategy as Tesla is seemingly pivoting away from its plans to produce a mass market vehicle (Model 2), and is instead focusing its efforts on autonomous driving.”
If Tesla does make the move toward producing fully self-driving robotaxis and away from mass-market electric vehicles, it would cast uncertainty on the company’s future, Levy added. He also raised the possibility that Tesla may disclose a negative free cash flow for the first time since the first quarter of 2020.
“While investors will enter the call with significant questions on Tesla’s strategy, we believe many of these questions may be unanswered,” Levy wrote.