Tesla’s stock tumbled by 7% on Thursday after its CEO, Elon Musk, warned that sales growth would slow down this year despite price cuts that have already hurt margins. This news raised investor concerns at the world’s most valuable automaker. Musk further stated that growth would be “notably lower” as Tesla focuses on manufacturing a next-generation electric vehicle at its Texas factory in the second half of 2025, which is expected to spark the next boom in deliveries.
The EV industry has been grappling with a slowdown in demand for more than a year, and the price cuts by Tesla will likely worsen the pressure on the startups and automakers such as Ford. “The problem for Tesla is any significant attempt to boost sales from here on will probably need to be achieved at the cost of further falls in operating margin, due to having to compete with BYD in China, as well as increased competition elsewhere,” said Michael Hewson, chief market analyst at CMC Markets.
Despite the news, at least 10 brokerages raised their price targets on Tesla, while four raised their outlook. The median price target now stands at $225, nearly 9% higher than the share’s last closing price. However, the company’s stock trades at nearly 60 times its 12-month forward earnings estimates, according to LSEG data. That gives it a more premium valuation than the other “Magnificent Seven” stocks – a group that includes Apple, Microsoft, and Nvidia. Some analysts said valuation could become tough to justify if Tesla’s sales growth and margin weaken further.
“Tesla is increasingly looking like a traditional auto company,” said Bernstein analyst Toni Sacconaghi.