Tesla (TSLA) shares extended declines Monday after analysts at Goldman Sachs lowered their rating on the EV maker, citing near-term pressure on its profit margins and the valuation fixed to the stock following its impressive year-to-date gains.
Goldman analysts, lead by Mark Delaney, lowered their rating on Tesla to neutral from buy. The stock's recent rally could be giving "more credit for its longer-term opportunities" while not properly discounting near-term pressure on profit margins tied to a difficult pricing environment, they said.
“We believe the stock now better reflects our positive long-term view of the company's growth positioning." Goldman wrote.
"While the primary reason for the change is that we think the market is now giving the stock more credit for its longer-term opportunities post the recent rally, we're also cognizant of the difficult environment for new vehicles that we think will continue to weigh on Tesla's automotive non-GAAP gross margin this year," the bank added.
Goldman did, however, boost its price target on Tela by $63 a share, to $248, in recognition of its longer-term earnings potential.
Tesla shares were marked 1.9% lower in premarket trading to indicate an opening bell price of $251.73 each.
Other Analysts Make Similar Calls
Late last week, longtime Tesla bull Adam Jonas of Morgan Stanley also lowered his rating to equal weight from overweight. But he insisted he was not "trying to call an end" to the stock's impressive 2023 rally as he added $50 to his price target, which now sits close to Goldman's at $250 per share.
Still, with Tesla shares trading more than 100 times higher than Jonas' full-year earnings forecast, upside would need to come from areas other than its mainstream EV dominance.
Analysts at Barclays also lowered their rating on Tesla, to equal weight from overweight heading into next month's earnings report. The move suggested that price discounts and margin pressures could "pull the plug" on the stock's 111% year-to-date rally.
Chief Executive Elon Musk in fact told investors earlier this year that Tesla would focus on growing sales and extending its lead in key markets over improving profitability. That move followed a mixed first-quarter-earnings report that included the thinnest profit margins in more than two years.
Tesla will likely publish its second-quarter delivery figures on Saturday. Investors will be looking for both a notable surge in China sales and ramped production at factories in Texas and Germany to support Musk's bullish thesis of a 2-million-unit 2023 target.
