Is Tesla's Stock Headed for a $14 Plunge Amid Delivery Drop and Overvaluation Concerns?

Key Takeaway

• Hedge fund manager Per Lekander predicts Tesla's stock could plummet to $14, citing an 8.5% drop in Q1 vehicle deliveries and overvaluation.
• Despite mixed analyst reactions, with some cutting price targets and others maintaining support, Tesla faces significant competition and operational challenges.
• Tesla's struggles include factory shutdowns, competition from Chinese EV makers, and skepticism around the Cybertruck's market reception.

Tesla's Stock Outlook

Per Lekander, a hedge fund manager at Clean Energy Transition, has expressed a bearish outlook on Tesla, predicting the company's stock could plummet to $14. This forecast follows Tesla's first-quarter vehicle delivery report for 2024, which showed a significant drop in deliveries, falling 8.5% from the previous year and about 20% from the fourth quarter. Lekander, who has been shorting Tesla since 2020, described the recent delivery numbers as the "beginning of the end of the Tesla bubble." He bases his prediction on an estimated full-year earnings per share of $1.40 for Tesla, suggesting the stock should be valued at 10 times forward earnings, a stark contrast to its current valuation of around 58 times forward earnings.

Market Reactions and Predictions

The market has seen a variety of reactions to Tesla's performance and outlook. Richard Windsor, founder of Radio Free Mobile, criticized Tesla's valuation as "ludicrous" amid rising competition and disappointing delivery numbers. Meanwhile, Dan Ives of Wedbush Securities, a noted Tesla bull, described the first quarter as an "unmitigated disaster" and a "seminal moment" for Tesla. Analysts at HSBC and TD Cowen have also cut their price targets on Tesla's stock. On the other hand, Cathie Wood's Ark Invest showed support by purchasing Tesla stock ahead of the delivery report. RBC Capital Markets analyst Tom Narayan highlighted potential near-term catalysts for Tesla, including the promotion of its Full Self-Driving system, and maintained an "outperform" rating with a $298 price target.

Challenges and Competition

Tesla's first-quarter performance was impacted by several challenges, including factory shutdowns due to the Red Sea conflict and an arson attack at Gigafactory Berlin. The company also faced stiff competition in China from domestic EV makers like BYD and newcomers such as Xiaomi. This competition, coupled with mixed reviews for Tesla's new Cybertruck and less effective sales incentives, has contributed to the company's recent struggles. Wells Fargo analyst Colin Langan downgraded Tesla stock, citing no expected growth in sales volumes for 2024 and projecting a decline in 2025. Langan's analysis reflects concerns over Tesla's growth prospects and its valuation in the face of these challenges.

Street Views

• Per Lekander, Clean Energy Transition (Bearish on Tesla):

  "This was really the beginning of the end of the Tesla bubble, which probably, arguably was the biggest stock market bubble in modern history... I actually think the company could go bust." "I think however Tesla cannot be at $14. If it falls under a certain level because of everything that’s been going on, it’s going to go bust."

• Richard Windsor, Radio Free Mobile (Bearish on Tesla):

  "While the long-term proposition of electrical vehicles remains unchanged, the realities of delivering on that proposition are really starting to tell as Tesla (and the others) have run out of well-heeled consumers willing to pay big money to be beta testers... There is still plenty of downside in Tesla’s shares."

• Dan Ives, Wedbush Securities (Cautiously Optimistic on Tesla):

  "Let’s call this as it is: While we were anticipating a bad 1Q, this was an unmitigated disaster 1Q that is hard to explain away. We view this as a seminal moment in the Tesla story for Musk to either turn this around and reverse the black eye 1Q performance... Otherwise, some darker days could clearly be ahead that could disrupt the long-term Tesla narrative."

• Tom Narayan, RBC Capital Markets (Bullish on Tesla):

  "Most of the reasons behind the fall in first-quarter deliveries were 'one-time in nature'... Maybe [the FSD trial] gets people in showrooms,... maybe it gets people to buy cars. So there is that near-term catalyst."