Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

Tesla's searing rally elicits downgrades, caution on Wall Street

Published 2023-06-26, 08:27 a/m
© Reuters. FILE PHOTO: A Tesla logo is pictured on a car in the rain in the Manhattan borough of New York City, New York, U.S., May 5, 2021. REUTERS/Carlo Allegri/File Photo
GM
-
GS
-
BARC
-
MS
-
TSLA
-

By Aniruddha Ghosh

(Reuters) -A blistering rally in Tesla Inc (NASDAQ:TSLA) shares has powered the EV maker's market value toward trillion-dollar levels, prompting some analysts to question its valuation and downgrade the stock.

Goldman Sachs (NYSE:GS) on Monday cut Tesla to "hold" equivalent rating, joining Morgan Stanley (NYSE:MS) and Barclays (LON:BARC), which downgraded the stock last week. The brokerages, however, raised their price targets to reflect the momentum in Tesla shares, which have soared 71% since late April and more than doubled this year.

The EV maker's shares were last down 1.2% in morning trading on Monday. Tesla's market capitalization of $813.29 billion far outstrips that of Japan's Toyota, which is the next biggest global car company by market value.

The brokerages have attributed the rally, which has cost short sellers $12.68 billion this year, partly to the company benefiting from the buzz around Artificial Intelligence.

Tesla shares have also benefited from a string of positive news in the past two months including deals struck by rival automakers Ford and General Motors (NYSE:GM) for gaining access to its charging network, a move that could make its chargers the industry standard.

The stock also got a boost from China's announcement of a 520 billion yuan ($72.3 billion) package of tax breaks for EVs and other green cars last week.

"While the market is now giving the stock more credit for its longer-term opportunities, we are also cognizant of the difficult pricing environment for new vehicles that we think will continue to weigh on Tesla's automotive non-GAAP gross margin this year," Goldman analyst Mark Delaney said.

Morgan Stanley and Barclays pointed out that Tesla's earnings were still at risk of negative revisions as it battles competition in China and may be forced to cut prices.

© Reuters. FILE PHOTO: A Tesla logo is pictured on a car in the rain in the Manhattan borough of New York City, New York, U.S., May 5, 2021. REUTERS/Carlo Allegri/File Photo

In April, Jefferies and Truist Securities downgraded Tesla after it reported lower margins in its first-quarter results.

However, the brokerages reiterated that they saw strong growth ahead with Tesla remaining a global EV leader.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.