What’s happening with Tesla on Wall Street: its shares have already sunk more than 40% in 6 months, opportunity?

Wall Street traders recently lowered their target for Tesla stock. This Thursday, UBS analysts (Union of Swiss Banks) reduced the numbers due to concerns about the potential risk of a decline in profits.

This decision comes amid a series of challenges facing the media giant. electric vehicles (EV), including concerns about demand and production. These problems directly impact the share price of tesla that fall in this Thursday’s stock market session -3.8%. Thus, it accumulates a precipitation of -13.6% in the month, and in the last six months it accumulates a red of -41%.

This leads investors to question the company’s ability to meet its goals.

Why are Tesla shares falling?

So far in 2024, Tesla’s shares have lost more than 32% in 2024. This also affected its market capitalization and reputation, as it is no longer part of the top 10 so-called megacaps. This happened after its results presentation, where the most valuable car manufacturer in the world mentioned that its sales growth this year could be “notably lower” than the previous year.

Additionally, a few factors are impacting Tesla’s stock price, including concerns about demand and production. Competition in China is also one of those important factors.

In a note last week, the strategists of Wells Fargo They described Tesla as “a growth company without growth“. The bank lowered its price rating on the stock to “Underweight“, saying that there is a “downside risk to volume as price cuts have diminishing impact“.

“We see headwinds due to disappointing deliveries and further price cuts, which will likely drive negative EPS revisionsWells Fargo analysts wrote. Wells Fargo’s earnings estimates for Tesla in 2024 and 2025 are 32% and 52% below consensus.

For its part, in a note this week, UBS lowered its price target for Tesla to $165 from $225, maintaining a rating of “Neutral” in actions. UBS also warned that forecasts for 2025 are likely to be lowered.

Purchase opportunity?

The idea that when a stock goes down it is a buying opportunity is based on the “buy low and sell high“. When a stock price declines, it may be for reasons unrelated to the fundamental health of the company, such as market volatility, investor panic, or external events, such as a pandemic.

In many cases, it is believed that the decline in the price of a stock does not reflect a decline in the intrinsic value of the company, so there may be an opportunity to purchase that stock at a lower price than would normally be available.

But, in this case, in Tesla, the investment advisor Gaston Lentini explains that the giant already had an enormous performance in 2022, although it was one of the companies that earned the most money per car sold, it saw its margins fall, “mainly due to the increase in competition in what has to do with electric cars worldwide“.

And it explains that there are several situations there. First, the historical car manufacturers that were improving their processes when it comes to electric cars. Second, with all the participation of Chinese cars in this world, which led to margins giving way.

Lentini warns that, taking the above into account, “our recommendation, since September of last year, was to get rid of Tesla shares”, thinking that the bulk of its rise could have already occurred during 2021-2022.

However, the advisor known in networks as Doctor of your financesemphasizes that Tesla is developing a new business related to the charger network, in which other electric car companies participate, closing agreements to join this network. However, “Tesla’s margins are not particularly encouraging, especially in a recessive economic scenario like the one expected for 2024,” he says. “Although it has reduced its debt level, Tesla is experiencing a decline in its revenue and sales.”

For investors, it may be risky to take a position in Tesla in the short term due to its current financial situation. However, some may see long-term potential if the company can improve its sales and business. Compared to companies like Microsoft, Tesla faces significant challenges as Microsoft has higher profit marginsconstant sales growth and debt reduction. This highlights a more favorable scenario for Microsoft’s business compared to Teslaconcludes Lentini.