Tesla, he wrote, is a “growth company with no growth.”
Langan predicts that Tesla’s growth will remain flat this year and then decline in 2025 as competition increases, deliveries disappoint and the beleaguered auto and tech company is forced to cut prices again.
UBS also downgraded its forecast for Tesla on Wednesday. Analysts said concerns are mounting as demand for electric vehicles slows and as Chinese rivals take an ever greater share of the global market.
With the exception of Tesla, all of the Magnificent Seven companies (that also includes Apple, Amazon, Meta, Google, Nvidia and Microsoft) saw double- or triple-digit earnings growth in the final three months of 2023. Tesla reported a 40% decline in profit from the year before.
Tesla has been navigating through a perfect storm. The EV environment is getting more crowded right as the company’s fundamentals have come into question. Its share price has dropped about 60% from its 2021 all-time high of $407.
But even with the recent drop in price, Tesla’s stock is still very expensive when compared to its actual earnings and profits, said Langan. The company’s former propensity for rapid growth is no longer certain, he said, and shares likely have further to fall.
Wells Fargo has lowered its price target for the stock from $200 to $125, predicting another 25% decrease in value. UBS, meanwhile, has lowered its price target to a more moderate $165 from $225.
Langan predicts that Tesla’s growth will remain flat this year and then decline in 2025 as competition increases, deliveries disappoint and the beleaguered auto and tech company is forced to cut prices again.
UBS also downgraded its forecast for Tesla on Wednesday. Analysts said concerns are mounting as demand for electric vehicles slows and as Chinese rivals take an ever greater share of the global market.
With the exception of Tesla, all of the Magnificent Seven companies (that also includes Apple, Amazon, Meta, Google, Nvidia and Microsoft) saw double- or triple-digit earnings growth in the final three months of 2023. Tesla reported a 40% decline in profit from the year before.
Tesla has been navigating through a perfect storm. The EV environment is getting more crowded right as the company’s fundamentals have come into question. Its share price has dropped about 60% from its 2021 all-time high of $407.
The story of Tesla’s (TSLA) decline has been well documented. The company has been plagued by safety issues and recalls, slowing growth and has even been forced to slash prices. But a new report by Wells Fargo analyst Colin Langan on Wednesday offers a darker picture than previously imagined.
Tesla, he wrote, is a “growth company with no growth.”
Langan predicts that Tesla’s growth will remain flat this year and then decline in 2025 as competition increases, deliveries disappoint and the beleaguered auto and tech company is forced to cut prices again.
But even with the recent drop in price, Tesla’s stock is still very expensive when compared to its actual earnings and profits, said Langan. The company’s former propensity for rapid growth is no longer certain, he said, and shares likely have further to fall.
Wells Fargo has lowered its price target for the stock from $200 to $125, predicting another 25% decrease in value. UBS, meanwhile, has lowered its price target to a more moderate $165 from $225.
Tesla has been pushing its driver-assist features, including Autopilot and what it calls “Full Self Driving,” which Tesla has insisted make driving safer than cars operated exclusively by humans. But NHTSA has been studying reports of accidents involving Autopilot and its Autosteer function for more than two years.
The recall comes two days after a detailed investigation was published by the Washington Post that found at least eight serious accidents, including some fatalities, in which the the Autopilot feature should not have been engaged in the first place.
Tesla’s owners manuals say: “Autosteer is intended for use only on highways and limited-access roads with a fully attentive driver.” But the company has pushed the idea that its driver assist features allow the cars to safely make most driving decisions even away from those roads.In February, Tesla recalled all 363,000 US vehicles then on the road with its FSD feature after finding cars operating with the feature would violate traffic laws, including “traveling straight through an intersection while in a turn-only lane, entering a stop sign-controlled intersection without coming to a complete stop, or proceeding into an intersection during a steady yellow traffic signal without due caution.”
Tesla is not the only automaker offering driver assist features marketed as “self-driving.” And it is not the only one to run into safety problems. Recently General Motors’ Cruise unit suspended its driverless taxi service nationwide after California authorities suspended its ability to operate the system there after an accident.
But, because it markets the names Autopilot and Full Self Driving, Tesla has made a greater emphasis than competitors on self-driving. It charges buyers $6,000 for cars with what it calls “enhanced Autopilot.” and $12,000 for the FSD feature.
Many who paid extra for those features have told CNN they think the features are not worth the extra money. But while the features have found support among other owners, the reports of serious accidents and deaths by police and safety regulators could hurt Tesla’s efforts to market the cars and their expensive features.
Autopilot’s importance to Tesla
Tesla is already the most valuable automaker in the world, by far, despite having a fraction of the sales of many established automakers such as Toyota, Volkswagen, General Motors, Ford and Stellantis.
Investors are betting on projections of future sales growth as well as the value of its software in making those stock valuations. CEO Elon Musk has said the company’s investment in artificial intelligence and its use in both self-driving vehicles as well as its plans for humanoid robots are a key to its current and future value.
“In the long term, I think, has the potential to make Tesla the most valuable company in the world by far,” Musk said in October on a call with Wall Street analysts. “If you have fully autonomous cars at scale and fully autonomous humanoid robots that are truly useful, it’s not clear what the limit is.”