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Bernstein analysts reiterated an Underperform rating on Tesla (NASDAQ:TSLA) and a $150 per share price target, which implies a downside risk of roughly 23% relative to yesterday’s closing price.
The focus of Bernstein’s research was the electric vehicle (EV) market in China, seen as the “most important EV market globally.”
The analysts remind investors that Tesla is losing market share in China, going from 22% in 2020 to 12% in 2022. This is mainly because of “intense competition.” They believe that the competition is only going to increase in China.
“We expect China BEV demand growth to decelerate to 25% YoY (~4.6M units), in line with the YTD trend. We forecast that Tesla will deliver 525k to 560k units in China this year, pointing to flat to slightly down market share, despite significant price cuts,” they wrote in a client note.
In addition, Bernstein’s survey shows that Tesla’s brand remains strong in China, however, it is also “increasingly polarizing and may be less appealing to customers beyond Tesla’s existing customer base.”
Finally, the analysts argue that Elon Musk’s EV giant will “struggle to meet expectations beyond this year until it is able to launch a low cost platform.”
“While a lower cost platform will certainly help, we believe it will likely come with meaningfully lower margins,” they further noted.
Tesla will also be forced to cut prices again and invest in marketing to spur demand. These activities may ultimately facilitate a de-rating in Tesla stock as they would “shift the debate on the stock from volumes to revenues or profits,” the analysts concluded.
Tesla shares are up 58.5% year-to-date (YTD).
