JPMorgan expects Tesla's stock to face downside risks, as the company's strategy of reducing car prices leads to the erosion of profits, without moving to significantly higher revenues.
The analyst at the bank Ryan Brinkman reduced the target price for the shares of the company run by Elon Musk until next December by about 4% to $130, which is 30% lower than Thursday’s closing at $182.6, according to the CNBC network.
The company's shares fell 12% at the end of Thursday's trading session, after it revealed quarterly business results below expectations, and it also warned that the growth in the volume of its car sales may become significantly lower this year.
The company achieved revenues of $25.17 billion in the fourth quarter, which was less than analysts' expectations of $25.6 billion. Adjusted earnings per share amounted to 71 cents, which was also below analysts' expectations of 74 cents.
In this regard, Brinkman said that Tesla's plan to reduce prices did not translate into higher levels in terms of revenues, and while the volume of car sales increased by 20% in the fourth quarter, actual revenues only recorded a growth of 1%, when compared to the previous year. Period.
According to JP Morgan, Tesla's profit expectations have declined significantly since October 2022, when analyst estimates indicated profits of $28.5 billion in 2024. However, the analyst consensus regarding the company's operating profit expectations at the present time indicates levels of $11.4 billion.
Brinkman added: However, Tesla's share price is currently at approximately the same levels as it was in October 2022, even though profit expectations have fallen by 60% since this period.
The bank also evaluates Tesla's stock as having a low weight, noting that the electric car company's diversification, attractive products, and advanced technology are offset by higher-than-average execution risks, and valuations that appear to price the stock higher than its levels.