Published -June 26th, 2023 @ 3:40 PM (GMT+2)

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Goldman Sachs Downgrades Tesla

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In recent news, Goldman Sachs has altered its stance on Tesla (NASDAQ:TSLA), moving from a "Buy" rating to a "Neutral" position. This decision comes after a significant year-to-date (YTD) rally in Tesla's stock, which has seen an impressive 108% increase, including a 38% surge in the past month. Despite the downgrade, Goldman Sachs analysts have raised the price target for Tesla from $185 to $248 per share, demonstrating increased earnings per share (EPS) estimates and a higher target multiple.

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The Reason for the Downgrade

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The change in rating primarily reflects an adjustment in response to Tesla's recent stock performance, suggesting that the current stock price more accurately mirrors Goldman Sachs' bullish perspective on the electric vehicle manufacturer. The analysts maintain a positive outlook on Tesla's long-term growth potential and competitive positioning within the EV market.
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Fourth Downgrade for Tesla

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Interestingly, this marks the fourth downgrade Tesla has received this month. Goldman Sachs' view echoes that of other analysts, who believe that Tesla's current valuation better encapsulates the company's long-term growth prospects, especially considering its leading position in the EV and clean energy markets. However, these analysts have also raised concerns about a challenging pricing environment for new vehicles, which could potentially impact Tesla's non-GAAP gross margin in 2023.

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Goldman Sachs's Previous Stance on Tesla

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Earlier, Goldman Sachs had reiterated a buy rating on Tesla and lowered the price target to $235.00 (from $305.00), after adjusting estimates to account for softer supply and demand. At that time, the financial giant projected 420K deliveries in 4Q22 (down from 440K) and 1.85 million units in 2023 (reduced from 1.95 million). Additionally, the analysts expected a slight sequential decline in non-GAAP gross margin in 4Q22 versus 3Q22, owing to the pricing and incentive actions Tesla had taken during the quarter.

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Adjustments in EPS Estimates

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Furthermore, Goldman Sachs adjusted the 2022/2023/2024 EPS estimates with Stock-Based Compensation (SBC) to $3.60/$4.50/$5.60 from $3.73/$4.90/$6.00. This was due to lower unit numbers, decreased vehicle average selling prices (ASPs), and reduced margins. However, excluding SBC, the firm modeled 2022/23/24/25 EPS at $4.05/$5.00/$6.20/$7.65.

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Tesla's Polarizing Brand Image

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The analysts also noted that Tesla's brand has been increasingly polarized due to CEO Elon Musk's prominent role on Twitter and in political topics. They believe that focusing consumer attention back on Tesla's core attributes of sustainability and advanced technology will be crucial for the company to meet or exceed long-term investor expectations.

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Tesla's Game - Changing Partnerships, Read More
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