Tesla stock delivered third downgrade in three days; Analyst sees stock as a ‘must own’
For the third time in as many days, Tesla ( TSLA ) stock received a downgrade on Friday as analysts expect slowing consumer demand and increased competition in China to cut into Tesla’s value. The stock was down on Friday after jumping around 2% on Thursday.
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DZ Bank doubled the Tesla share to a sell rating, down from the previous buy rating. The firm has a price target of 210 on Tesla. The move from DZ Bank follows downgrades from Morgan Stanley and Barclays this week.
On Thursday, Morgan Stanley downgraded Tesla to equal weight from overweight and raised its stock price target to 250, up from 200 and about 5% below where the stock closed Thursday.
The memo cited Tesla as an artificial intelligence (AI) beneficiary as well as a car company. Morgan Stanley’s view is that high expectations for AI have brought Tesla stock to a fair valuation.
“We’re not trying to call the ‘end’ of the Tesla rally,” Morgan Stanley analyst Adam Jonas said Thursday. “And from our discussions, we continue to find a significant degree of investor skepticism/lack of exposure around the name.”
Jonas added that despite the downgrade, Morgan Stanley sees Tesla as a “must own” in an EV portfolio and as an industrial “flag bearer” for electric transportation and the renewable energy economy.
“Despite the recent rally, we expect materially negative revisions to Tesla’s consensus earnings forecasts,” Jonas told investors.
Morgan Stanley predicts “increasing competition” from China’s EV players and slowing car demand from consumers, both posing increasing risks to Tesla stock. Jonas sees the Tesla share in a bull case reaching 450 and in a bear case 90, within the next 12 months.
Tesla shares fell 0.9% Friday in premarket trading. On Thursday, the shares jumped around 2% to 264.61. Tesla shares fell 5.4% to 259.46 on Wednesday. On Tuesday, the shares rose 5.3% to 274.31.
On Wednesday morning, Barclays analyst Dan Levy also downgraded Tesla shares to equal weight, down from overweight. Levy raised the firm’s TSLA price target to 260, up from 220 previously.
The Barclays analyst wrote that the stock’s recent rally has been “too sharp for challenging near-term fundamentals.” Levy told investors questions about margins and demand for Tesla cars remain concerns.
Tesla shares
TSLA has increased by around 30% in June. Last week, the stock jumped more than 6% despite two consecutive sessions of losses.
Before shares fell last Wednesday, Tesla enjoyed a streak of 13 straight gains. The shares have risen around 140% since January 3. However, Tesla is down 36% from the record high of 414 it reached in November 2021.
Tesla is well extended past a buy point at 207.79 from what is either a cup or a double bottom base.
Shares are more than 30% above their 200-day/40-week moving average. That’s the most extended they’ve been since the stock marked its peak in November 2021.
Tesla shares rank third in IBD’s automaker industry group. It has a 99 Composite Rating out of 99. Tesla has a 90 Relative Strength Rating and EPS Rating is 93 out of 99.
Follow Kit Norton on Twitter @KitNorton for more coverage.
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