Tesla was handed a downgrade early Monday on expectations that slowing demand for electric vehicles will extend into 2025. Meanwhile, Morgan Stanley's Adam Jonas compared the EV giant to Toyota Monday, claiming "changing tastes of the global auto consumer" are driving Toyota shares higher while Tesla stock flounders.
Mizuho on Monday downgraded Tesla to neutral from its previous buy rating with a 195 price target on TSLA shares. The firm wrote that it is constructive on the broader electric vehicle landscape with the long-term trend to electrification. However, Mizuho expects near-term EV demand and tightening liquidity to create more challenges for the industry into 2025.
The firm predicts 2024 EV growth up 15% compared to last year, down from its previous view of 25% growth. Along with Tesla stock, Mizuho also downgraded Rivian and Nio (NIO) to neutral from buy ratings.
Morgan Stanley's Jonas also weighed in on Tesla Monday. The longtime Tesla bull looked at the EV giant and Toyota, discussing how TM shares have gained 50% in 2024 while TSLA has dropped more than 30%.
Jonas wrote Monday that Tesla's market capitalization would reach parity with Toyota at a TSLA share price of approximately 120, 30% below current levels. At that point, "Tesla would hand its crown of being the world's highest valued auto company back to Toyota."
"We think the disparity between the two companies is emblematic of the changing tastes of the global auto consumer which has seen EV sales decelerate in key markets," Jonas wrote Monday.
TSLA shares advanced 1% to 172.56 during Monday's market action. Tesla stock fell more than 1% to 170.83 Friday, but gained 4.4% on the week, booking its first weekly advance in three weeks.
Tesla Stock: China Production Cuts
Bloomberg reported Friday that Tesla is reducing production at the China plant to five days a week from 6.5 days. The output cuts started earlier in March and could continue through April, according to Bloomberg.
The move comes amid slowing EV growth in China and with Tesla's Shanghai facility already not producing at full capacity. Tesla observers have repeatedly said in recent weeks that global inventory appears high.
Jonas wrote Monday that if the Bloomberg the report is accurate "it would be yet another sign of oversupply in the world's largest EV market."
The analyst added that Tesla could be "witnessing price-cut fatigue with consumers (buyers' strike) and may be testing profitability levels that the company may not find acceptable."
"However, we prefer production cuts to price cuts to help balance supply with demand," Jonas wrote.
Meanwhile, with one week left in the first quarter, Tesla appears to be heading for a delivery miss. Wall Street consensus currently still has Q1 deliveries of 481,000 units, according to FactSet. However, this number is expected to come down sharply as many analysts have cut predictions in recent days.
Predictions appear to be more around the 422,875 number that Tesla hit in Q1 2023. The global EV giant hit a record 484,507 deliveries in Q4 2023. The previous quarterly delivery record was in Q2 with 466,140.
Tesla is expected to report Q1 2024 deliveries in early April.
Tesla Stock Performance
Two weeks ago, Tesla stock dropped 6.7% to 163.57, hitting new 2024 lows and levels not seen since May 2023. TSLA is down more than 15% in March and the biggest loser on the S&P 500 index so far in 2024.
Over the weekend, Tesla began rolling out its latest Full Self-Driving update to Tesla customers.
Meanwhile, China-based battery giant CATL, a top supplier to Tesla, is working with the EV giant on faster charging battery technology. CATL confirmed to Bloomberg it is supplying machinery for Tesla's Nevada plant.
In August 2023, CATL launched a new low-cost, fast charging, lithium iron phosphate (LFP) battery it says can power a vehicle for 248 miles after 10-minutes of charging.
With 2023 in the rearview mirror, analyst consensus now has 2024 Tesla earnings below 2023's level. That signals another year of earnings declines for this growth stock. Wall Street expects Tesla earnings per share of just $2.95 a share in 2024, according to FactSet. That would be more than a 5% decline vs. last year's $3.12.
The EV giant ranks eighth in the 35-member IBD Auto Manufacturers industry group. The stock has a 32 Composite Rating out of a best-possible 99. Tesla stock also has a 10 Relative Strength Rating and a 68 EPS Rating.
Please follow Kit Norton on X, formerly known as Twitter, @KitNorton for more coverage.
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