Investing.com -- Concerns about Tesla’s brand damage may be exaggerated, according to Piper Sandler, which maintained an Overweight rating on the stock with a $450 price target in a note Monday.
While some investors and analysts attribute Tesla’s year-over-year delivery declines to CEO Elon Musk’s political activity, Piper Sandler argues that supply constraints played a bigger role in the first-quarter shortfall.
"It would be naive to claim that Elon Musk’s behavior is having no impact on demand. All else equal, Musk’s political endeavors are probably a net negative for deliveries," the firm noted.
However, it added that "it’s incorrect when investors and/or journalists point to politics as the primary driver of Tesla (NASDAQ:TSLA)’s double-digit y/y delivery declines (in Q1)."
The firm cited updated wait time figures, which indicate that supply issues, rather than demand weakness, were a key factor in the delivery miss.
In addition, they believe multi-week shutdowns impacted all four of Tesla’s Model Y factories, limiting the company’s ability to fulfill orders even if demand had been significantly stronger.
Piper Sandler also sees potential catalysts ahead for Tesla, including new product unveilings in the coming months and the highly anticipated robo-taxi launch in June.
The firm feels these developments could help offset concerns over recent delivery trends.
With these factors in mind, Piper Sandler reiterated its bullish stance on Tesla, arguing that the market may be overestimating brand damage and underestimating supply-side constraints as the real cause of Q1’s weak deliveries.