Despite a downgrade from Goldman Sachs, shares of Tesla (TSLA) have shown strength in the market, going green less than an hour after Monday’s cash open. The downgrade from Goldman Sachs was due to the stock price reflecting the company’s long-term growth potential and a tougher pricing environment for autos. However, Goldman still believes that Tesla is well-positioned for long-term growth and expects Q2 deliveries to track in the right direction.
Key Points
1. Despite a downgrade from Goldman Sachs, shares of Tesla showed strength and remained resilient in the stock market after the announcement. The stock quickly rebounded and settled near unchanged in response to the broader market rallying.
2. Goldman Sachs downgraded Tesla from a Buy rating to Neutral due to the stock’s substantial YTD gains and recent price increases, both of which led to a tougher pricing environment for autos. However, Goldman Sachs still believes Tesla is well-positioned for long-term growth and expects Q2 deliveries to be in line with consensus.
3. Tesla’s recent strength can be attributed to factors such as better-than-expected sales in April and May, fewer price cuts than anticipated, incremental IRA credits for the RWD Model 3, and increased market focus on companies benefiting from AI. Additionally, Goldman Sachs highlights Tesla’s leading position in powertrain technology and its potential for incremental revenue from its charging network.
Despite a downgrade from Goldman Sachs, Shares of Tesla showed strength and turned green less than an hour after Monday’s market open. The stock settled near unchanged during the morning session as the broader market rallied. The downgrade by Goldman Sachs was based on the stock price moving higher and a tougher pricing environment for autos. The analyst noted that the market is now giving the stock more credit for its longer-term opportunities. However, he still believes Tesla is well-positioned for long-term growth and raised the company’s EPS estimates.
Goldman believes that Tesla’s Q2 deliveries are on track with higher volumes in the first two months of the quarter than in prior quarters. The firm expects deliveries to be roughly in line with consensus at around 445,000 to 450,000 vehicles. The pricing cuts by Tesla have been stronger than expected, with some small price increases on certain models and discounting focused on vehicles in inventory. Goldman sees Tesla as an industry leader in terms of powertrain technology and costs and believes the company remains at the forefront of innovation in both cost and capabilities.
Goldman also mentions Tesla’s major win in charging, with Ford, GM, and Rivian recently adopting its charging standard. The firm predicts $1 to $3 billion of incremental revenue from opening up the network. Despite the downgrade, Goldman still believes Tesla is a must-own company in any EV portfolio and views it as an industrial standard bearer for the EV industry.
Last week, Morgan Stanley also downgraded Tesla to equal weight but raised its price target. The firm stated that Tesla remains a must-own company in any EV portfolio and is emerging as an industrial standard bearer for the EV industry. However, the stock’s current price, at over 100 times its future earnings forecast, discounts significantly more than just being a dominant EV company, according to Morgan Stanley.
Despite the downgrade, sentiment toward Tesla remains positive, and there is a belief that the stock could continue to rise in the future.
