By Senad Karaahmetovic
Berenberg analysts downgraded Tesla (NASDAQ:TSLA) stock to Hold from Buy as they believe the upside is limited following the year-to-date (YTD) outperformance.
Tesla shares are up 52% YTD and 21% since the analysts upgraded in late January. They believe the current valuation “leaves less room for disappointment.”
“We argued that Tesla can take market share at a gross margin of c25% (excluding credits), which indeed is where we see investor expectations heading for 2024,” the analysts wrote in a downgrade note.
“With the shares now priced on a 2025E P/E of 25x and EV/sales of 4.5x, we prefer automakers elsewhere in our coverage.”
On the recent price cuts, the analysts see them as an investment in growth. The electric vehicle (EV) maker is increasingly focused on volumes, which will mean near-term margins are sacrificed.
“This positions them competitively against new electric vehicle (EV) launches as the Berlin and Austin plants ramp up, replicating elements of Shanghai’s low-cost processes.”
Long-term, Berenberg remains bullish on Tesla stock and highlights the “significant” opportunity in the smaller vehicle segment.
“[New vehicle segment] could expand Tesla’s total addressable market (TAM) by cUSD1trn, which is 75% larger based on our forecast of market size in 2026. We model a slow rollout in the segment, however, not breaking through a 1m vehicle delivery run-rate (roughly our 2023E Model Y volume) until 2028,” the analysts concluded.
While the 2023 EPS outlook is lowered to $4.00, the price target goes up to $210 per share (from $200) on the raised outer-year estimates based on increased cost efficiencies.
Tesla stock is down 1% in pre-market Wednesday.