Wall Street has a way of gauging the tone and tenor of the moment. It forecasts a broad perspective on what’s to come in markets, outlooks, and sector deep dives, and it’s up to us to sort through the nuances to decide the direction of our own investments.
Several recent comments from Wall Street analysts paint a dour picture for Tesla Inc. 2024, starting with the company’s expected Q4 profit report and reaching into a perceived marketplace-wide disillusion over electric vehicles (EVs).
Then again, optimists among the analysts are seeing the silver lining of Tesla’s long term, Big Picture potential.
What a year 2024 is sure to be! Will Tesla’s dominant position in the EV sector, which Bloomberg says makes it perhaps the only viable bet for investors in the industry, be enough to help its stock price flourish again?
Tesla’s trailing 12 month revenue has grown by only 17.8%, while its net income is down 14.3%, and its operating margin has fallen by over a third to 11.2%. Tesla has risen about 2% since end of September, compared with the broader S&P 500 Index’s 11.5% total returns.
Tesla shares were up to $252.54 at close on Friday, but the stock’s performance this quarter has been well below expectations. For sales, analysts on average expect Tesla to deliver over 481,000 EVs in Q4.
Wall Street Points Out Likely Problems for Tesla in 2024
Analysts’ average Q4 profit forecasts for Tesla are now down over 55% from where they were 12 months back, while 2024 profit expectations have sunk 43% over the same period, according to data compiled by Bloomberg. How much growth space can Tesla carve out when its market valuation already far exceeds other automakers and more closely mirrors big tech companies? Delivery estimates on Tesla for 2024 and 2025 reflect more modest growth for Model 3 and Model Y sales, according to Tesla analysts.
Tesla benefited from the enthusiasm and insights of early adopters who wanted to be part of the Tesla family, and this momentum only increased with the release of the more affordable Model Y. Musk has teased a 2024 more affordable version, but no concrete plans have been released. The Cybertruck has attracted some new followers, but overall high company prices continue to stymie a new Tesla audience.
Some Tesla models will no longer be eligible for US and EU government subsidies. Tesla has warned on its website that the least expensive Model 3 sedan and a long-range version will no longer qualify for federal tax credits after Dec. 31. The cars have a battery made in China. Tesla may face issues in France and Germany, according to Tudor’s Matt Portillo. Subsidy troubles, an industry-wide slowdown in EV demand, and Tesla’s Q3 public acknowledgment of its stagnant growth combine to suggest difficulties in Europe for Tesla in 2024. Without subsidies, company growth spurts may halt and price cuts will likely return — at least in the short term.
The biggest buyers of new cars, including rental firms, are cutting back on EV adoption because they’re losing money on resales, with Sixt SE dropping Tesla models from its fleet. Earlier this week the EPA published its Automotive Trends Report, which included data for model year 2022 vehicles. Record low carbon emissions and high fuel economy were assisted by increased popularity of hybrid vehicles. We can critique the long term value of hybrids, but Tesla only sells battery electric vehicles, so it’s not participating in the short term hybrid surge.
Other Analysts Express Optimism for Tesla 2024
Conversely, Wall Street seems convinced that the Fed will reach its goal of a soft landing for the US economy, according to Investor’s Business Daily. That means there will be slower economic growth but no recession, leading to interest rate cuts in 2024. In that environment, most analysts predict improved corporate earnings growth for S&P 500 companies.
Tesla started trading on the S&P 500 Index in 2020 with closing shares on its first day of $232. A wild subsequent ride has baffled stockholders. The stock closed Thursday at $254.50. Meanwhile, the S&P 500 has climbed roughly 27% since Tesla’s introduction, led by mega-cap technology stocks such as Microsoft Corp., Apple Inc. and Nvidia Corp. Tesla, which has the seventh-largest weighting in the index, is among the bottom half of S&P performers over that time.
Yet Dan Ives, an analyst at Wedbush raised its price target on Tesla stock to $350 from $310 and reiterated its Outperform rating, according to reports at Barron’s. Barron’s notes that analysts surveyed by FactSet rating Tesla at Hold, on average, with a consensus price target of $241. Ives leans toward the more bullish end of Wall Street forecasters, concluding that Tesla’s market share in EVs is likely to rise in 2024, including in China, while margins — under pressure amidst price cuts — stabilize:
“While overall EV demand has clearly moderated globally we are still in the early days of this massive transformation with Tesla leading the way as we estimate by 2030 roughly 20% of autos will be EV based… Also noteworthy is that as Detroit stalwarts GM and Ford among others appear to be tempering the EV transformation, Tesla is now doubling down with Cybertruck, and we expect another sub $30k vehicle to be announced over the next 6 to 9 months.”
Wedbush also is optimistic that Tesla’s Full Self-Driving capabilities will continue to improve with ongoing upgrades to its artificial intelligence technology. AI is one of the biggest stories ahead for 2024, as it can further automate enterprise software applications by minimizing the need for human labor. Pitchbook agrees, suggesting that these shifts should accelerate or sustain as AI models improve on the back of immense VC investment.
There’s continued expectation that Tesla will be able to build a viable self-driving vehicle before its competitors do. Issues with its autopilot systems are a “non-event,” says CFRA Research analyst Garrett Nelson, since it is more of an update than a traditional recall. Nelson also predicts that Tesla will announce a new, lower priced EV by the end of 2024, which will make its stock very appealing, indeed. He recommends buying Tesla.
Cathie Wood and her Ark Invest purchased Tesla stock this week — it’s the first time in 8 months. Arc Invest bought 111,387 TSLA shares Wednesday, according to the company’s daily trade disclosure. Based on the closing price of $247.14, Wood spent $27.53 million on the Tesla stock purchases. Wood’s Tesla trades were done through the ARK Innovation ETF (ARKK) and ARK Next Generation Internet (ARKW). As of December 21, TSLA was third in ARKK with a 7.33% weight. Meanwhile, Tesla stock is the sixth ranked holding in ARKW, with a 4.75% weight.
Final Thoughts about Tesla & Wall Street 2024
As always, there are disputes among Wall Street analysts as to where Tesla will be situated financially in 12 months. Perhaps, as our esteemed chief editor at CleanTechnica, Zachary Shahan, has mused, expectations for Tesla “have just gotten too ridiculous.”
With the various scenarios that might affect its stock value in 2024, it is interesting to note that Tesla is still considered a moderate buy, with the average 12-month price target standing at $245.96 – a 2.43% downside compared to today – according to data compiled by TipRanks.
Despite overall positive trends, Tesla’s significant volatility makes analyst consensus nearly impossible. Nonetheless, Tesla stock is likely to be one of the top stocks to watch next year, whether you are a bull or a bear.
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