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Shares of the electric-car maker Tesla (NASDAQ: TSLA) continued its struggles to open the week of trading, falling roughly 8.3% as of 10:17 a.m. ET today after a Wall Street analyst lowered his price target on the stock and maintained a sell rating.
Delivery forecasts tank
UBS analyst Joseph Spak cut his price target on Tesla by $34 to $225, and shares of Tesla traded around $240, as of this writing. The analyst lowered his first-quarter delivery estimates on the company from 437,000 to 367,000, citing lower demand among Tesla's Model 3 and Model Y in select markets. The 367,000 delivery estimate implies a 26% quarterly drop in deliveries and a 5% decline year over year.
Spak's lower delivery estimate also implies that the company's gross margin in its auto business will decline by 330 basis points from the previous quarter to 10.3%, excluding credits. That would also be down from 16.4% in the first quarter of 2024.
This isn't the first time analysts have raised concerns about Tesla's first-quarter struggles. Many have cited a significant slump in sales in Europe in January, a period where the overall electric-vehicle (EV) market has supposedly been on the rise. Tesla's sales have also apparently struggled significantly in China, according to data from the China Passenger Car Association (CPCA) last week.
What goes up usually comes down
After a massive surge for the stock following President Donald Trump's election win in early November, Tesla has now retraced and given up all those gains. In my view, the stock simply ran too far too fast, with investors buying hope over clear catalysts.
Now, with the market struggling, companies trading at rich multiples -- like Tesla -- are vulnerable. The stock still trades at about 85 times forward earnings, so I'm not buying the dip just yet.
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