Tesla (NASDAQ: TSLA) shares rose more than 2% on Tuesday, despite Daiwa downgrading the stock, citing increased governance concerns.
Daiwa Capital Markets has downgraded Tesla (TSLA) to a Neutral rating, moving it down from its previous Outperform status. This decision comes alongside a $50.00 reduction in their 12-month price target, now $195.00. The firm has cited growing concerns over corporate governance issues, which could worsen Tesla’s already challenging financial condition in 2024.
The downgrade follows a Delaware judge’s ruling that raised doubts about the independence of Tesla’s Board, leading to the cancellation of CEO Elon Musk’s compensation. The Wall Street Journal’s report on February 4th shed further light on these governance issues. Analysts at Daiwa warn that these concerns could lead to uncertainties regarding potential changes in Tesla’s leadership and Board structure.
Daiwa emphasizes Tesla’s need to prioritize long-term goals and improve automotive manufacturing techniques for its investment strategy. Tesla’s commitment to long-term objectives is evident in its investments in full self-driving (FSD), next-generation (lower-priced) EVs, and robotics, setting it apart from the wider industry pulling back due to a near-term slowdown in EV demand. Any disruptions to these initiatives could jeopardize Tesla’s technological advancements and cost advantages. For instance, a shakeup in the Board might lead to decision-making delays and restrict investment horizons.
Analysts Maintain 2024 and 2025 EPS Estimates
Despite the downgrade, analysts remain steadfast in their 2024 and 2025 earnings per share (EPS) projections at $3.10 and $4.25, respectively. These forecasts hinge on an anticipated surge in delivery volume, expected to rise by 13% and 16% for the respective years. Although EV sales growth in the US tapered to 5% in January, more favorable comparisons bolstered sales growth in China.
Analysts wrote in a note,
“While we could see some improvement from current levels as the kinks around IRA subsidy availability are removed, the persistence of slower growth could put further pressure on pricing.”
Tesla (NASDAQ: TSLA) Stock Performance
TSLA stock increased 2.23% to close at $185.10 on Tuesday. The traders had exchanged hands with 122,182,373 (122.18 million) shares compared to the average daily trading volume of 117.12 million.
Edward Cooke is a financial analyst, freelance writer, and editor. He has six years of experience in financial journalism. He has an in-depth understanding of equities markets, tracking major indices and providing real-time analysis on stock price movements, corporate earnings, and market sentiment.
