The pace of electric vehicle (EV) sales growth has slowed over the last year. Most current-generation EVs are expensive, interest rates are up, and public charging availability isn’t yet where it needs to be. Tesla (TSLA 1.05%) also has a mercurial and outspoken CEO, Elon Musk, whose provocative and heavily political statements in recent months may be driving green-minded car buyers toward alternatives.
With the end of the quarter looming, an analyst at Mizuho Financial Group on Sunday evening cut his rating on Tesla’s stock to “neutral” from “buy” and cut its price target as well.
Why Mizuho cut Tesla stock to neutral
Mizuho analyst Vijay Rakesh wrote that while the longer-term trend toward electric vehicles remains intact, near-term demand and tightening liquidity will challenge Tesla and other electric vehicle leaders into 2025. In Tesla’s case, signs of a slowdown in China’s EV market will add to the pressure. The bank’s analyst team now sees overall EV sales growth rising 15% in 2024, down from an earlier estimate of 25% annual growth.
Rakesh thinks that lower-cost EV models, now expected from several manufacturers in late 2025 and 2026, will drive further growth. That may help support the bank’s new price target of $195, which — despite the near-term concerns — still represents about 13% upside over the next 12 months or so from Monday’s closing price.
There may be more price target cuts coming for Tesla
There’s a temptation for investors to “buy the dip” during times like these. I’m not sure that’s a good idea with Tesla right now. Between the public antics of its very public CEO, the fast-growing number of credible competitors to Tesla’s aging EV models, and the factors putting pressure on the broader EV market in the near term, we may be at the beginning of a period in which Tesla’s likely growth and its still-sky-high valuation are reassessed by a sobered-up market.
If so, that $195 price target may get cut further. Be careful here.
John Rosevear has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
