Investor's Corner
Tesla receives lower price target as Goldman questions ‘sustainable demand’ for Model S,3,X
Tesla shares (NASDAQ:TSLA) could face some volatility this Thursday, as analysts from Goldman Sachs and RBC Capital Markets downgraded the electric car maker’s stock. In a note to the firm’s clients on Thursday, Goldman Sachs analyst David Tamberrino questioned the “sustainable demand” for Tesla’s Model S, X, and 3, arguing that the “downward path” for the company’s shares will resume.
Tamberrino, who has been one of Tesla’s most aggressive critics in Wall Street, lowered his price target for TSLA stock from $200 per share to $158 per share. This represents a potential ~30% drop from the electric car maker’s $226.43 closing price on Wednesday. In his note, the Goldman analyst argued that the decline in Tesla shares would resume as it becomes evident that demand for the company’s electric cars is “below expectations.”
“We believe that is the largest question for investors to underwrite at this point — what are sustainable demand levels for the Model S, Model X, and Model 3 — and how does that change with the introduction of Model Y production? We believe a downward path for shares will resume as it becomes more clear that sustainable demand for the company’s current products are below expectations,” Tamberrino wrote.
The Goldman analyst did admit that deliveries in the second quarter will likely meet forecasts, though he insisted that delivery forecasts in the second half of the year are too optimistic.
“Volume estimates for the second half of the year look generous considering there are fewer levers (such as lower prices and leasing options) to pull to stoke demand going forward. Further, when coupled with a lack of direct impetus to open up new demand pockets (other than introducing incentives or more attractive financing rates) and another step-down in the US Federal Tax Credit for Telsa vehicles beginning on July 1, we believe 2Q19 was a better environment for demand and thus deliveries, but to a level that is likely not sustainable,” Tamberrino added.
It was not just the Goldman Sachs analyst that gave Tesla a pessimistic outlook on Thursday. In a recent update, RBC Capital Markets also opted to lower its earnings estimates for the electric car maker.
Goldman and RBC’s sentiments lie in opposition to the forecasts of Tesla’s supporters from Wall Street. In a recent note, Tesla bull and Berenberg analyst Alexander Haissl noted that claims questioning the demand for the company’s electric cars are “decoupled from reality” and “overblown.” Haissl further argued that the negative sentiments surrounding Tesla today fail to understand Tesla’s “technological and cost advantage” over its competitors.
“Demand worries are overblown, as the Q1 volume weakness was largely self-inflicted by logistic problems, uncertainty about store closures and changing pricing structure, and not indicative of the underlying demand situation,” Haissl wrote.
Baird analyst Ben Kallo, another Tesla bull, noted this past Monday that the recent rise in TSLA shares could be related to the “start of short covering over the next few weeks.” According to Kallo, several aspects are in place today that could trigger short covering, including “several upcoming catalysts,” the 40 million TSLA shares that are currently sold short, and the fact that the “demand issue will be proven false.”
Elon Musk, for his part, has assured Tesla investors that there are no issues with the demand for its vehicles. During the company’s annual shareholder meeting, the Tesla CEO noted that there is even a “decent chance” that Tesla would reach new records in the second quarter.
Tesla stock was down 1.85% at $222.25 per share after Thursday’s opening bell.
Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.
Tesla stock (NASDAQ: TSLA) closed at an all-time high on Tuesday, jumping over 3 percent during the day and finishing at $489.88.
The price beats the previous record close, which was $479.86.
Shares have had a crazy year, dipping more than 40 percent from the start of the year. The stock then started to recover once again around late April, when its price started to climb back up from the low $200 level.
This week, Tesla started to climb toward its highest levels ever, as it was revealed on Sunday that the company was testing driverless Robotaxis in Austin. The spike in value pushed the company’s valuation to $1.63 trillion.
Tesla Robotaxi goes driverless as Musk confirms Safety Monitor removal testing
It is the seventh-most valuable company on the market currently, trailing Nvidia, Apple, Alphabet (Google), Microsoft, Amazon, and Meta.
Shares closed up $14.57 today, up over 3 percent.
The stock has gone through a lot this year, as previously mentioned. Shares tumbled in Q1 due to CEO Elon Musk’s involvement with the Department of Government Efficiency (DOGE), which pulled his attention away from his companies and left a major overhang on their valuations.
However, things started to rebound halfway through the year, and as the government started to phase out the $7,500 tax credit, demand spiked as consumers tried to take advantage of it.
Q3 deliveries were the highest in company history, and Tesla responded to the loss of the tax credit with the launch of the Model 3 and Model Y Standard.
Additionally, analysts have announced high expectations this week for the company on Wall Street as Robotaxi continues to be the focus. With autonomy within Tesla’s sights, things are moving in the direction of Robotaxi being a major catalyst for growth on the Street in the coming year.
Elon Musk
Tesla needs to come through on this one Robotaxi metric, analyst says
“We think the key focus from here will be how fast Tesla can scale driverless operations (including if Tesla’s approach to software/hardware allows it to scale significantly faster than competitors, as the company has argued), and on profitability.”
Tesla needs to come through on this one Robotaxi metric, Mark Delaney of Goldman Sachs says.
Tesla is in the process of rolling out its Robotaxi platform to areas outside of Austin and the California Bay Area. It has plans to launch in five additional cities, including Houston, Dallas, Miami, Las Vegas, and Phoenix.
However, the company’s expansion is not what the focus needs to be, according to Delaney. It’s the speed of deployment.
The analyst said:
“We think the key focus from here will be how fast Tesla can scale driverless operations (including if Tesla’s approach to software/hardware allows it to scale significantly faster than competitors, as the company has argued), and on profitability.”
Profitability will come as the Robotaxi fleet expands. Making that money will be dependent on when Tesla can initiate rides in more areas, giving more customers access to the program.
There are some additional things that the company needs to make happen ahead of the major Robotaxi expansion, one of those things is launching driverless rides in Austin, the first city in which it launched the program.
This week, Tesla started testing driverless Robotaxi rides in Austin, as two different Model Y units were spotted with no occupants, a huge step in the company’s plans for the ride-sharing platform.
Tesla Robotaxi goes driverless as Musk confirms Safety Monitor removal testing
CEO Elon Musk has been hoping to remove Safety Monitors from Robotaxis in Austin for several months, first mentioning the plan to have them out by the end of 2025 in September. He confirmed on Sunday that Tesla had officially removed vehicle occupants and started testing truly unsupervised rides.
Although Safety Monitors in Austin have been sitting in the passenger’s seat, they have still had the ability to override things in case of an emergency. After all, the ultimate goal was safety and avoiding any accidents or injuries.
Goldman Sachs reiterated its ‘Neutral’ rating and its $400 price target. Delaney said, “Tesla is making progress with its autonomous technology,” and recent developments make it evident that this is true.
Investor's Corner
Tesla gets bold Robotaxi prediction from Wall Street firm
Last week, Andrew Percoco took over Tesla analysis for Morgan Stanley from Adam Jonas, who covered the stock for years. Percoco seems to be less optimistic and bullish on Tesla shares, while still being fair and balanced in his analysis.
Tesla (NASDAQ: TSLA) received a bold Robotaxi prediction from Morgan Stanley, which anticipates a dramatic increase in the size of the company’s autonomous ride-hailing suite in the coming years.
Last week, Andrew Percoco took over Tesla analysis for Morgan Stanley from Adam Jonas, who covered the stock for years. Percoco seems to be less optimistic and bullish on Tesla shares, while still being fair and balanced in his analysis.
Percoco dug into the Robotaxi fleet and its expansion in the coming years in his latest note, released on Tuesday. The firm expects Tesla to increase the Robotaxi fleet size to 1,000 vehicles in 2026. However, that’s small-scale compared to what they expect from Tesla in a decade.
Tesla expands Robotaxi app access once again, this time on a global scale
By 2035, Morgan Stanley believes there will be one million Robotaxis on the road across multiple cities, a major jump and a considerable fleet size. We assume this means the fleet of vehicles Tesla will operate internally, and not including passenger-owned vehicles that could be added through software updates.
He also listed three specific catalysts that investors should pay attention to, as these will represent the company being on track to achieve its Robotaxi dreams:
- Opening Robotaxi to the public without a Safety Monitor. Timing is unclear, but it appears that Tesla is getting closer by the day.
- Improvement in safety metrics without the Safety Monitor. Tesla’s ability to improve its safety metrics as it scales miles driven without the Safety Monitor is imperative as it looks to scale in new states and cities in 2026.
- Cybercab start of production, targeted for April 2026. Tesla’s Cybercab is a purpose-built vehicle (no steering wheel or pedals, only two seats) that is expected to be produced through its state-of-the-art unboxed manufacturing process, offering further cost reductions and thus accelerating adoption over time.
Robotaxi stands to be one of Tesla’s most significant revenue contributors, especially as the company plans to continue expanding its ride-hailing service across the world in the coming years.
Its current deployment strategy is controlled and conservative to avoid any drastic and potentially program-ruining incidents.
So far, the program, which is active in Austin and the California Bay Area, has been widely successful.
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