Why are analysts adjusting Tesla's stock price range downwards?

The EV maker delivered only 386,810 vehicles last quarter, an 8.5% drop from the same period last year

Tesla stock price has dropped more than 30 per cent since the start of the year. Reuters

Electric vehicle maker Tesla’s shares dropped again on Wednesday after analysts adjusted its future stock price range downwards on the back of lower-than-expected deliveries this year.

Shares of the company closed down 2.89 per cent at $171.76, giving it a market value of $538.2 billion. The company's shares have dropped nearly 31 per cent since the start of the year.

Tesla's stock is one of the worst performers in the S&P 500 index, which has jumped nearly 9 per cent since start of the year.

Philippe Houchois, an analyst at capital markets firm Jefferies, reduced his price target for Tesla stock from $185 to $165 on Wednesday, while Piper Sandler analyst Alexander Potter adjusted the firm's target down to $205 from $225.

Mr Houchois and Mr Sandler predicted Tesla would deliver 1.77 million and 1.79 million vehicles this year, respectively, down from 2023’s record of more than 1.81 million.

Tesla chief executive Elon Musk. Reuters

“Most issues affecting core auto performance appear self-inflicted and should keep returns well below potential for the coming 24 months,” said Mr Houchois.

The adjustment followed previous concerns voiced by Jefferies regarding Tesla's 2024 first-quarter performance, which has been clouded by uncertainty stemming from the company's product priorities and management.

Jefferies expects that the Texas-headquartered company will experience “heavily negative” cash burn during the January-March period. However, Mr Houchois said the negative cash burn would not deter Tesla from financing its future projects.

Tesla, which went public in 2010, is expected to announce its first-quarter earnings on April 23.

Baird’s senior research analyst Ben Kallo has estimated Tesla will deliver 1.84 million vehicles this year, while 1.94 million deliveries are expected during January-December period, according to the FactSet estimates.

“There is no denying that the demand environment has deteriorated,” said Mr Kallo.

Tesla’s questionable autopilot technology

On Tuesday, Tesla agreed to settle a lawsuit in a road crash case that caused the death of Apple engineer Walter Huang. The accident occurred in 2018 when Mr Huang's Model X, operating on autopilot, crashed into a motorway barrier.

The lawsuit initiated by Mr Huang's family was set to commence this week in the California Superior Court.

The terms of the settlement, which are reportedly pending a judge’s approval, were not made public.

Industry analysts said Tesla autopilot and full self-driving technology would have come under more scrutiny if the trial had proceeded.

In December, the National Highway Traffic Safety Administration directed Tesla to recall nearly every vehicle it has sold in the US because of safety concerns over its autopilot feature. Altogether, more than two million Tesla vehicles will be recalled.

Why are Tesla deliveries declining?

Last week, Tesla said its deliveries fell for the first time in four years after the car maker faced disruptions caused by Houthi rebel strikes in the Red Sea and an arson attack at its German factory.

It also said the production ramp-up of the updated Model 3 partially caused the decline.

The EV maker produced 433,371 cars last quarter but delivered only 386,810, about an 8.5 per cent drop from deliveries during the same period last year.

It marked the first time Tesla reported a year-on-year decline since the Covid-19 pandemic affected deliveries in 2020.

“Tesla's path forward may lie beyond the confines of the EV space and into innovation. Introducing new and exciting alternatives and offerings to enhance the user experience could reignite demand growth for Tesla,” Thomas Monteiro, senior analyst at Investing.com, told The National.

Mr Monteiro said high-end consumers are still hesitant to rely on something that is not “as practical as traditional gas-powered cars, and thus, they await the next innovation that will elevate the EV market”.

Tesla reduced the average selling price of its vehicles last year and aims to launch new models to attract more customers.

The company is expected unveil its robotaxi at an event on August 8.

In November, it delivered its first Cybertrucks, four years after the futuristic vehicles first made their debut. The company said it has the capacity to build more than 125,000 Cybertrucks in a year.

A Tesla Cybertruck during a test drive in Los Angeles, California. All photos: Bloomberg

The Cybertruck announces Tesla's entry into the lucrative and highly competitive pickup market in the US

The electric vehicle has a range of about 510km, and accelerates from 0 to 100kph in just 2.6 seconds

The vehicle's stainless steel body is bullet proof

The Cybertruck has a fully self-driving capability with autopilot

About 2,000 of the space-age vehicles rolled off the production line in late November 2023

The interior of the Tesla Cybertruck