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Tesla stock is on thin ice after the EV maker reported a record delivery miss on Tuesday, according to JPMorgan.
Tesla reported first quarter vehicle deliveries of 386,810, well below Wall Street estimates of about 450,000.
JPMorgan reiterated its "underweight" rating on Tesla and lowered its price target to $115 from $130, representing potential downside of 31% from current levels.
That bearish call comes after Tesla stock plunged 60% from its record high in 2021. According to JPMorgan analyst Ryan Brinkman, that decline may not be enough.
"Even after a 59% decline, valuation is still demanding," Brinkman said in a note on Wednesday.
Brinkman blamed waning demand and intensifying competition for Tesla's sale woes, and said that investor patience could be wearing thin for the company after a three-year downturn.
"We are slashing our estimates and price target for Tesla shares after updating for 1Q24 deliveries which yesterday tracked materially softer than JPM and consensus expectations and which we estimate could spell trouble for investor confidence in the company's long-term growth outlook that is so critical to sustaining the stock's rarified valuation multiple," Brinkman said.
Brinkman said Tesla's first quarter deliveries missed analyst estimates by the greatest amount on record, highlighting just how big of a miss the company's results were, especially when considering that analyst estimates were already declining heading into the data release.
"At the peak of expectations on June 10, 2022, analysts surveyed by Bloomberg estimated Tesla would sell 626K vehicles in 1Q24, but the actual number of vehicles sold in 1Q24 reported yesterday was just 387K or -38% less than what was once forecast," Brinkman explained.
The wide gap between peak expectations and actual vehicle sales in the first quarter has been blamed on the rise of hybrid cars, factory supply disruptions, and strong price competition from China automakers.
Those risk factors may not be ending anytime soon, making it even more difficult for Tesla to maintain its current premium valuation.
"We caution Tesla shares could fall much further still should the company not be successful in quickly restoring unit volume and revenue growth, lest investors elect to no longer assign the stock its still hyper growth company valuation multiple," Brinkman said.
Most concerning to Brinkman is that while Tesla's vehicle sales slowed, its underlying profits have been deteriorating as several vehicle price cuts over the past year have eaten into the company's profit margins.
Those deteriorating profits could put added pressure on Tesla and its investor base, who may finally ditch the company's aspirational goals of fully autonomous cars and humanoid robots, and instead focus on the profitability of its core auto business.
"With 1Q24 deliveries now known to have contracted, we are highly confident both automotive and total company revenue will be negative in 1Q, likely causing even the most bullish investors to take a sentiment check," Brinkman said.
