Key points
- Tesla is at the top Marketbeat List of the most downgraded stocks and they could remain there this year.
- The consensus is for a 20% upside, but that is falling, and many new targets see double-digit downsides.
- The TSLA stock market is at a critical juncture that could lead the market lower — or produce a solid bounce.
- 5 stocks we like more than Tesla
Tesla NASDAQ:TSLA shares are down more than 40% from their highs and could fall. Growing headwinds in the electric vehicle market related to demand and costs have reduced the once-robust growth outlook and put the TSLA stock market on the ropes. Price action shows signs of support at a critical level, so downside risk may be limited. If support at the critical level fails to hold, this could lead to a massive outflow of investor dollars. In this scenario, Tesla shares could drop another 30-40% before reaching solid support.
Sentiment worsens for Tesla: it is the most downgraded stock in the first quarter of 2024
Sentiment soured for Tesla following its first quarter release. Highlights included weak top and bottom lines and tepid guidance, which expected volume growth to be significantly lower than in previous years. The news sparked a series of analyst reviews that can only be described as unsatisfactory, with 22 of the 23 reports including a downgrade, a reduction in price target, or both.
While the consensus is for more than 20% upside for the stock price, investors shouldn’t be too bullish at this time. It has a bearish trend and is likely to weigh on the market in the near future. Some new targets are above consensus, but most are below, and further weakness is expected before bottoming. As for the sentiment, it has fallen Reduce from suspension.
The only outlier among analysts is Wedbush, which reiterated its Outperform rating. The company’s analysts have set Tesla shares with a price target of $315. This target is far from the high price target of $320, which is also trending lower. Morgan Stanley was the most bullish on Tesla with a $345 target, but cut it 7.5% after the first-quarter release.
The most recent downgrade is from Mizuho. Although the company calls Tesla the leader in electric vehicles, Mizuhot downgraded Tesla shares and the sector, citing concerns about demand and liquidity. Not only is demand weakening overall, but inventories are a concern, as is growing competition from China reducing North American manufacturers’ market share. All major EV OEMs guided light for 2024, below previous forecasts and capabilities, and the outlook may be optimistic.
Tesla is an expensive stock no matter how you look at it
Wells Fargo cited the valuation among its concerns when it cut Tesla to its lowest rating, setting a target of $125, or 30% below the current stock. They believe 55x this year’s earnings and 40 times next year’s are high prices, even for Tesla. The other Magnificent Seven stocks and most blue chip tech stocks are approaching 30 times this year’s earnings and are supported by healthier end markets.
The next visible catalyst for Tesla stock will be the FQ1 results expected at the end of April. Analysts are putting downward pressure on the market with downward revisions ahead of the report, but perhaps setting the bar too low. The consensus is that sequential growth will slow from low-double digits to single digits and that year-over-year growth will accelerate sequentially. However, 11% is down sharply from 24% last year and below industry forecasts. Forecasts are decreasing but continue to vary from low values ​​up to 30%, depending on the data used.
Tesla’s technical structure is questionable
Tesla’s technical setup shows a market that may be at support levels but is uncertain and has abundant downside risks. The market shows support near $160, in line with the previous low. But the market is also below critical resistance, which is near $180, a number that has provided support and resistance numerous times since 2021. If this level cannot be regained soon, Tesla stock could enter range bound at current levels with a chance. of a profound correction. If the market fails to sustain support near $160, the next target will be $120.
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