Two-day target price cut by $10! Why is Wall Street bearish on Tesla?
As the rating was downgraded, only 50% of the analysts covering Tesla recommend buying, which is lower than the 65% at the beginning of this year.
After Tesla released its financial report, Wall Street is lowering its target price and, in some cases, downgrading its stock rating.
Of course, Cathie Wood of the bullish ARK Invest raised Tesla's target price, which is an exception.
After several price cuts on its cars, Tesla is raising the prices of its most expensive models, the S and X, which happened a few days after the price cut in early April.
Investors should expect Tesla to make more price adjustments.
This year, in the face of a weak economic outlook, Tesla seems to be adjusting its pricing to adjust production according to demand.
Truist analyst William Stein lowered Tesla's target price from $245 per share to $154 per share and downgraded the rating from Buy to Hold, in part due to pricing.
Stein said: "The pricing trend has magnified the importance of Tesla's artificial intelligence business (FSD), but has weakened the value of its core automotive business."
He said Tesla's first-quarter performance did not surprise him. "What surprised us was that Tesla said it was willing to further reduce prices, accept lower car profit margins, and expand and deepen its ability to generate revenue from AI projects (especially FSD)."
Tesla believes that when the FSD software is good enough, many Tesla drivers will buy it, creating new sources of high-profit revenue.
As ratings are downgraded, 50% of analysts covering Tesla rate it as Buy, lower than the 65% at the beginning of this year.
In contrast, the average buy rating ratio for S&P 500 index component stocks is about 58%. The average target price of analysts is about $192, which has fallen by about $10 since the first-quarter earnings report was released.