Tesla stock price target cut by a third as Model 2 is needed to 'right the ship,' analyst says
- Evercore ISI slashed its price target on Tesla stock to $200 from $300, according to a Tuesday note.
- The firm said it wants to see Tesla launch a Model 2, which is envisioned as a lower-cost EV.
Evercore ISI slashed its target price for Tesla stock on Tuesday, citing demand concerns as well as declining market share in Europe and China.
Analysts cut their target to $200 from $300, though that still represents about 40% upside from current levels.
While Tesla continues to enjoy a leading EV gross margin advantage from global scale, vertical integration, and benefits in the US Inflation Reduction Act, "it is impossible to ignore that investors are already well aware of these benefits but now must ALSO battle test demand assumptions for '23-25," they wrote in a note.
Tesla stock has been under immense pressure this year, while Chief Executive Elon Musk continues to sell shares.
The stock has plunged more than 60% from its November 2021 high and slipped 5% Tuesday to $142. Evercore pointed out that shares lost support at the key $150-163 technical level.
"China stalled growth remains, but with global backlog winding down, investors are also revisiting demand assumptions for the first time," the note said. Analysts also said that while the biggest challenges to Tesla stock have been Musk's acquisition of Twitter and the electric vehicle maker faltering in China, more factors are now weighing on the stock. Headwinds were "originally pegged at ~75% 'TWTR noise' & 25% China/other, the 'other' has grown louder."
Elon Musk has faced criticism over his acquisition of social media company Twitter, with Tesla investors growing concerned that his current preoccupation as chief executive of Twitter is taking away from Musk's focus on the electric car company.
But Evercore also sees a way for Tesla to battle back, pointing to the so-called Model 2, which will bring a more affordable price point and appeal to a broader pool of consumers. The price is rumored to start at $25,000 for its lowest-range model, though Musk has indicated that the rollout is still far on the horizon.
"What we want to see to right the ship... simple, the Model 2, as in our ~2.7MM '25 units, we count 500k+ Model 2s, which don't exist yet. China & EU desperately need a smaller & cheaper model," analysts wrote.