JPMorgan Chase said Tesla’s stock price faces significant downside as the automaker’s strategy of slashing vehicle prices eats into profits without translating into significantly higher revenue. Analyst Ryan Brinkman lowered JPMorgan’s Tesla stock price target by December 2024 by about 4% to $130, which would represent a decline of about 30% from Thursday’s closing price of $182.63. According to FactSet data, Tesla shares are currently trading at 56 times consensus profit expectations for 2024, and JPMorgan Chase is worried that this stagnant revenue growth cannot justify this valuation. Tesla shares closed down 12% on Thursday after the automaker reported lower-than-expected profits for the week and warned that vehicle sales growth “may slow significantly” this year. “Tesla’s profit estimates are down, but even after Thursday’s sell-off, we don’t seem to be paying attention to the stock, which suggests there’s still room for the stock,” Brinkman told clients in a note on Friday. Lots of further downside potential.” Tesla’s strategy of cutting prices on its cars hasn’t translated into higher revenue. JPMorgan Chase said that although auto sales increased by 20% in the fourth quarter, actual auto revenue was basically the same as the same period last year, growing only 1%. Brinkman told clients: “Tesla does not trade profits for sales measured by revenue, but trades profits for sales measured by unit sales.” Since October 2022, Tesla has Pull’s profit forecast dropped sharply, when analysts forecast 2024 profits of $28.5 billion. Analysts currently forecast Tesla’s operating profit this year to be $11.4 billion. “But Tesla shares are trading at about the same price today as they were in October 2022, even though 2024 profit expectations have fallen -60% since then,” Brinkman wrote. JPMorgan rates Tesla “underweight,” arguing the automaker’s differentiated business, attractive products and cutting-edge technology are “offset by above-average execution risk and a valuation that appears to It has reflected many factors.” “While technology and execution risks appear to be much lower than previously feared, expansion into higher-volume segments at lower prices appears to be a viable option relative to demand, execution and competition,” Brinkman told clients. fraught with greater risks.” The analyst said: “At the same time, valuations appear to reflect upside associated with mass market expansion, well beyond our Model 3 sales forecasts.”
