Investor's Corner

Bank of America cuts Tesla price target, says it can rebound with two strategies

Analysts at Bank of America have decided to cut the price target for Tesla stock (NASDAQ: TSLA). The firm also suggested the electric automaker take one of two strategies to get back on track.

BoA slashed its price target on Tesla by over 20 percent from $280 to $220, maintaining its ‘Neutral’ rating on the automaker’s shares.

Last week, Tesla reported deliveries that missed Wall Street targets, as the company blamed an arson at Gigafactory Berlin, as well as the ramp-up of its updated Model 3 at the Fremont Factory, due to the decline in production and deliveries:

“Decline in volumes was partially due to the early phase of the production ramp of the updated Model 3 at our Fremont factory and factory shutdowns resulting from shipping diversions caused by the Red Sea conflict and an arson attack at Gigafactory Berlin.”

However, the reasoning for the decreased delivery and production volumes seemed to indicate more issues down the road for Tesla, at least in BoA’s eyes, as it said in a note that EV demand may be softening in several markets, especially in North America:

“Inventory built up in 1Q, and it appears that the primary driver of the softer delivery numbers was declining demand for electric vehicles across geographies, especially in North America, where EV sales volumes have been largely flat since the summer of 2023.”

The firm said Tesla can take one of two options to turn things around. One of them we know is in development, and the other is more of a fluid option.

BoA believes Tesla can revamp interest and demand in EVs by developing a new model. Tesla is expected to unveil the new Robotaxi on August 8, which will be built on the same platform as the $25,000 vehicle, and they could both be the answer to those concerns.

Tesla analyst states ‘Robotaxi is not the answer now’

Additionally, BoA says price cuts could be the next way to increase demand, but this could have some impact on Tesla’s profit margins, which many bullish analysts do not want to see:

“This leaves pricing as the main lever to stimulate demand (which we note has not worked very well so far). Volume growth remains one of the company’s key priorities, implying that more price discounts could happen.”

Tesla shares are trading at $171.30 as of 2:42 p.m. EDT.

Disclosure: Joey Klender owns TSLA stock.

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Bank of America cuts Tesla price target, says it can rebound with two strategies
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