Elon Musk, visionary and Tesla (TSLA) founder, isn’t exactly known for mincing words. His latest challenge: no one should hold Tesla stock unless they believe the electric vehicle maker can solve the vehicle autonomy problem. Investors disbelieved in droves, as shares dropped over 10% in Wednesday afternoon’s trading. Analysts, meanwhile, maintained a surprising depth of confidence.
Andres Sheppard from Cantor Fitzgerald kept his Overweight rating in place and held the $230 price target. He looked for a better long-term outcome for Tesla, something that many investors didn’t seem to hold. In addition, several analysts left their positions unchanged despite Musk’s new red line, which suggested at least some level of confidence in Tesla’s ability to function and prosper going forward.
However, many believed the long term looked a lot better than the short term. In fact, Garrett Nelson of CFRA came out to lower Tesla’s price target from $250 to $240 per share, declaring a lack of “…near-term catalysts for the story.”
Short-Term Troubles
However, Tesla could potentially face a bigger problem: rising discounts and growing spending. The electric car market is basically Tesla’s bread and butter right now, and with discounts on the rise, that means revenue potential and margins will decrease accordingly.
Meanwhile, Tesla is ratcheting up spending on artificial intelligence (AI), which it hopes will drive future growth. That’s great, but it also means a lot of spending that is, right now, not producing future earnings and is driving down the stock in turn.
Is Tesla a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Hold consensus rating on TSLA stock based on 11 Buys, 12 Holds, and seven Sells assigned in the past three months, as indicated by the graphic below. After a 16.52% loss in its share price over the past year, the average TSLA price target of $213.92 per share implies 3.08% downside risk.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
