"Let's call it like it is: 1Q deliveries has been a nightmare quarter for Tesla," Wedbush analysts said.
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Wedbush slashed its price target for Tesla stock, warning of a difficult period ahead for the electric-vehicle maker following a terrible first quarter for deliveries.
Analysts cut their price target for Tesla to $300 a share, down from $315 a share. That still implies a 66% upside for the stock, but the firm said in a note on Wednesday that the outlook for Tesla was uncertain, evidenced by a difficult first quarter.
The Wedbush analysts estimated that deliveries in China were most likely down 3% to 4% year-per-year. That's setting the stage for Tesla to hit only 2 million deliveries for the whole year, they projected, down from the originally expected 2.1 million.
"Let's call it like it is: 1Q deliveries has been a nightmare quarter for Tesla as China demand remains very soft coming out of the gates for 2024. While supply issues (factory downtimes/Berlin fire) has impacted supply, there is no denying this has been a quarter to forget for Musk and Tesla," analysts wrote. "For Musk this is a fork in the road time to get Tesla through this turbulent period otherwise darker days could be ahead."
Sagging demand is exacerbated by the fact that investors are growing tired of ongoing issues within Tesla's leadership and with Elon Musk. Musk caused a firestorm earlier this year after stating that he might move artificial-intelligence projects outside Tesla. A Delaware court also recently struck down his $55.8 billion pay package, leading Musk to say he'd start shifting Tesla's state of incorporation from Delaware to Texas.
Wedbush still has a "high level of confidence" in Tesla's full-self-driving technology as well as its AI software growth, but the company's challenges are creating a bleaker near-term outlook.
"While Tesla right now is caught between 'two waves of growth,' patience is starting to wear very thing among investors," the analysts said.
There are a handful of things Musk and Tesla can do to reset the trajectory of the EV maker, Wedbush says. Corrective measures include offering more guidance on deliveries and profits in 2024, building a strategy to address demand issues in China, and Musk stating his full commitment to being Tesla's CEO for the next three to five years, including its AI projects.
"We remain bullish on Tesla over the next few years despite the near-term dark storm demand clouds forming with China the main culprit."
"However, getting through this white knuckle period will be a defining chapter for Musk & Co. and the future of Tesla."
Other Wall Street analysts have also slashed their price targets for Tesla. The stock is down 27% this year, diverging sharply from the performance of other Magnificent Seven names such as Nvidia and Microsoft.
