Wall Street Lowers Expectations... Tesla Faces 'Bubble Valuation Controversy' Again

Goldman, Morgan Stanley, DZ Bank and Others Downgrade Investment Ratings

Global investment banks are lowering their expectations for Tesla, consecutively downgrading their investment ratings and target prices. This adds weight to the speculation that Tesla's stock price bubble, following its record-breaking longest rally, may be overinflated.

According to major foreign media on the 26th (local time), Goldman Sachs downgraded its investment rating for Tesla from 'Buy' to 'Neutral' the day before. Mark Delaney, a Goldman Sachs analyst, pointed out, "The market currently has high expectations for Tesla's long-term value, but in the short term, intensified competition such as new car price cuts and a more challenging business environment will continue to weigh on profits."

He explained that Tesla's oligopolistic position is being shaken and profitability is inevitably deteriorating as traditional U.S. automakers like Ford and General Motors (GM), as well as low-priced Chinese electric vehicle brands, increase their market competitiveness. Along with the downgrade, Goldman Sachs raised the target price from $185 to $248, but the pre-upgrade target price was significantly lower than the current stock price ($241.05).

Morgan Stanley, previously a Tesla bull, also downgraded its investment rating for Tesla from 'Overweight' to 'Equal-weight' on the 22nd. Morgan Stanley's target price for Tesla was $250, which was lower than the closing price on the same day ($264.61).

German DZ Bank also sharply downgraded its investment rating for Tesla from 'Buy' to 'Sell' on the same day, lowering the target price from $220 to $210. The $210 target price is about 23% lower than Tesla's current stock price. Earlier, Barclays pointed out that Tesla's profits are at risk of losses as price cuts become unavoidable due to competition within China.

With Wall Street's target price downgrades continuing and renewed controversy over Tesla's overvaluation, Tesla's stock closed down sharply by 6.06% at $241.05 that day. In after-hours trading, as of 7:45 p.m. local time, it was down 0.32%. Since the beginning of the year until the 20th, Tesla's stock price surged more than 153%, hitting a high of $274.45, but then fell as profit-taking selling pressure increased.

Elon Musk, CEO of Tesla.
Photo by Reuters Yonhap News

Earlier, news that competitors decided to use Tesla's charging system and the Chinese government's extension of electric vehicle tax reductions helped Tesla's stock price achieve its longest rally ever, but limitations in new car strategies have surfaced, sparking renewed controversy over excessive valuation of the recent stock rally.

Tesla's sales share in the U.S. market has been declining since peaking at 66% in 2020. Bank of America analysts recently forecasted in a report that Tesla's share of the U.S. electric vehicle market will fall to around 18% by 2026. Bank of America estimated Tesla's electric vehicle market share last year at 62%, expecting it to drop to about one-third of that level within four years.

The main cause of Tesla's weakening growth momentum is the absence of new models. Earlier on the 13th, the Wall Street Journal (WSJ) reported that Tesla's upcoming electric pickup truck (Cybertruck) has faced multiple production delays, pushing its launch to the end of next year. This is more than three years later than the originally announced launch schedule (2021) when Tesla first unveiled the Cybertruck to the media in 2019. Tesla has not released a new model since the 'Model Y' in 2020.

This content was produced with the assistance of AI translation services.