JPMorgan cuts Tesla's price target by 32 percent after delivery failure highlights growth concerns

• JPMorgan says Tesla's stock will be hit hard after its big first-quarter delivery miss.

• JPMorgan cut its price target on Tesla shares from $130 to $115, a potential decline of 31%.

• "Even down 59%, valuation requirements remain high," JPMorgan said.

Tesla shares are on thin ice, JPMorgan Chase thinks, as the electric car maker reported a record number of delivery misses on Tuesday.

Tesla reported first-quarter deliveries of 386,810 vehicles, well below Wall Street's estimate of about 450,000.

JPMorgan reiterated its "hold" rating on Tesla, 鈥竝檛 lowered its price target from $130 to $115, which implies that Tesla shares could fall by 311 TP3T from the level where they were before.

This comes after Tesla shares plummeted 60% from their all-time high in 2021, a drop that JPMorgan analyst Ryan Brinkman thinks may not be enough.

"Even down 59%, valuations are still high," said Bollinger Kerman in a report on Wednesday.

Blaming Tesla's sales woes on weakening demand and increased competition, Bollinger said investors' patience with the company may have run out after a three-year slump.

"We are lowering our expectations and price target for Tesla stock following our update on Tesla's 1Q24 deliveries, which yesterday came in significantly below JPMorgan and consensus expectations, which we estimate could cause trouble for investor confidence in the company's long-term growth prospects, which are which is critical to maintaining the stock's high valuation.

Tesla's first-quarter deliveries exceeded analysts' expectations by the widest margin ever, underscoring just how much the company's industry miscues have been, especially considering analysts' expectations were already dropping before the numbers were released, Bollinger Kerman said.

"At the expected peak on June 10, 2022, analysts surveyed by Bloomberg expected Tesla to sell 626,000 vehicles in 1Q24, but yesterday reported actual vehicle sales in 1Q24 of just 387,000, less than once predicted -" explained Bryn Konkman. 38%.

The wide gap between peak expectations and actual vehicle sales in the first quarter was blamed on the rise of hybrid vehicles, disruptions in factory supply, and intense price competition from Chinese automakers.

These risk factors may not end anytime soon, making it more difficult for Tesla to maintain its current premium valuation.

"We warn that if Tesla does not succeed in quickly restoring sales and revenue growth, the company's stock price could fall further, lest investors choose to stop assigning the stock's still extraordinarily high growth-company valuation multiple," said Bryn Konman.

Most worrisome for Bollinger is that Tesla's underlying profits are deteriorating at the same time as its car sales are slowing, as several car price cuts over the past year have eroded the company's profit margins.

Deteriorating profits could put even more pressure on Tesla and its investor base, who may ultimately abandon the company's ambitious goals of fully self-driving cars and unaided robots in favor of focusing on the profitability of its core automotive business.

"With deliveries now known to have contracted in 1Q24, we are very confident that we will see negative growth in both the automotive business and total company revenue in the first quarter, which could cause even the most bullish Tesla investors to do a sentiment check," said Bryn Konkman.

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