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Again in December, I stated my share value goal for Tesla (NASDAQ: TSLA) inventory in 2024 was $154. That value could have sounded a bit loopy again then, because the inventory was buying and selling close to $240 (greater than 50% larger) on the time.
Quick ahead to at present nevertheless, and my value goal is trying fairly good. After an enormous fall this yr, the inventory’s now lower than 10% away from $154.
The valuation was too excessive
In December, I famous Tesla was going through many short-term dangers. And this yr, we’ve seen these play out.
One potential threat I highlighted was a slowdown within the electrical automobile (EV) market attributable to decrease ranges of ‘big-ticket’ spending from shoppers and shifting attitudes in direction of EVs.
We’ve definitely seen this in 2024. For the primary quarter, Tesla reported automobile deliveries of 386,810, a drop of 8.5% from the identical quarter final yr and properly beneath the consensus forecast of 457,000.
One other threat I highlighted was growing competitors from rivals. And we’ve seen this too.
For instance, final month, smartphone producer Xiaomi introduced the launch of its new SU7. This EV – which is designed to go face to face with Tesla’s Mannequin 3 – acquired 50,000 orders in simply 27 minutes.
Given the dangers, I stated that I assumed Tesla’s valuation was manner too excessive (its price-to-earnings (P/E) ratio was round 70 on the time). This yr, we’ve seen the valuation come down.
Additional share value weak point forward?
As for the outlook for Tesla inventory from right here, I believe issues could worsen earlier than they get higher.
At the moment, the P/E ratio utilizing the consensus earnings forecast for 2024 is slightly below 60. The a number of nonetheless appears to be like too excessive to me. I feel it wants to return down additional given the challenges the corporate is going through.
It’s price noting that many brokers are lowering their value targets for Tesla. For instance, Bernstein just lately took its value goal to $120 from $150 (and stored an ‘underperform’ ranking on the inventory) whereas Wells Fargo made Tesla a ‘tactical underweight’ (promote) and gave it a value goal of $125.
I feel these targets make sense in gentle of the difficult near-term backdrop.
Lengthy-term progress story
Now, I’ll level out that I do see causes to be bullish on Tesla in the long term. What pursuits me is the corporate’s ‘Dojo’ supercomputer.
This know-how – which is getting used to coach Tesla’s Full Self-Driving (FSD) system – has been described by fund supervisor Cathie Wooden because the “largest synthetic intelligence mission on this planet”.
I’m additionally excited by the alternatives linked to autonomous driving. If Tesla can pull off its FSD aim, its revenues (and share value) might explode.
I’m not speeding to purchase the inventory at present nevertheless. At present ranges, the EV firm’s too costly for me from a valuation perspective.
