Tesla shares are downgraded as this bull explains why Toyota beats EV Giant

Tesla (TSLA) was downgraded on Monday amid expectations that declining demand for electric vehicles will continue through 2025. Meanwhile, Morgan Stanley’s Adam Jonas compared the EV giant to Toyota (TM) On Monday, it was claimed that the “changing tastes of the global auto consumer” are driving Toyota shares higher, while Tesla shares are plummeting.




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Mizuho on Monday downgraded Tesla to neutral from its previous buy rating with a price target of 195 for TSLA shares. The company wrote that it is constructive in the broader electric vehicle landscape with the long-term trend toward electrification. However, Mizuho expects that short-term demand for electric vehicles and tighter liquidity until 2025 will pose more challenges for the sector.

The company predicts EV growth will increase by 15% in 2024 compared to last year, down from its previous expectation of 25% growth. Along with Tesla shares, Mizuho was also downgraded Rivaans (RIVN) and Nio (NIO) (NIO) to Neutral from Buy ratings.

Morgan Stanley’s Jonas also weighed in on Tesla on Monday. The longtime Tesla bull looked at the EV giant and Toyota and discussed how TM stock is up 50% in 2024, while TSLA is down more than 30%.

Jonas wrote on Monday that Tesla’s market capitalization would become equal to Toyota’s if TSLA’s share price was about 120, 30% below current levels. At that point, “Tesla would give its crown as the world’s highest-rated car company back to Toyota.”

“We believe the disparity between the two companies is emblematic of the changing tastes of the global auto consumer, which has seen electric vehicle sales slow in key markets,” Jonas wrote on Monday.

TSLA shares rose 1% to 172.56 during Monday’s market action. Tesla shares fell more than 1% to 170.83 on Friday, but rose 4.4% this week for its first weekly gain in three weeks.

Tesla Stock: Production Cuts in China

Bloomberg reported on Friday that Tesla is reducing production at its Chinese factory from 6.5 days to five days a week. According to Bloomberg, production cuts began earlier in March and could continue through April.

The move comes amid slowing electric car growth in China and with Tesla’s Shanghai factory not yet producing at full capacity. Tesla observers have repeatedly said in recent weeks that global supplies appear high.

Jonas wrote on Monday that if Bloomberg’s report is true, “it would be another sign of oversupply in the world’s largest EV market.”

The analyst added that Tesla “could witness price cut fatigue among consumers (buyer strike) and potentially test profitability levels that the company may not find acceptable.”

“However, we prefer production cuts to price cuts to balance supply and demand,” Jonas wrote.

Meanwhile, with a week left in the first quarter, Tesla appears to be heading for a delivery miss. The Wall Street consensus currently still has Q1 deliveries of 481,000 units, according to FactSet. However, this number is expected to drop sharply as many analysts have lowered their forecasts in recent days.

Predictions seem to be more around the 422,875 number that Tesla reached in the first quarter of 2023. The global EV giant reached a record 484,507 deliveries in the fourth quarter of 2023. The previous quarterly delivery record was in the second quarter at 466,140.

Tesla is expected to report deliveries for the first quarter of 2024 in early April.

Tesla stock performance

Two weeks ago, Tesla shares fell 6.7% to 163.57, hitting new lows for 2024 and levels not seen since May 2023. TSLA is down more than 15% in March and is the biggest loser yet on the S&P 500 index in 2024.

Last weekend, Tesla started rolling out the latest Full Self-Driving update to Tesla customers.

Meanwhile, China-based battery giant CATL, a top supplier to Tesla, is working with the EV giant on faster-charging battery technology. CATL confirmed to Bloomberg that it is supplying machines for the Tesla factory in Nevada.

In August 2023, CATL launched a new, low-cost, fast-charging lithium iron phosphate (LFP) battery that it claims can power a vehicle for 250 miles (400 km) after 10 minutes of charging.

With 2023 in the rearview mirror, the consensus among analysts is now for Tesla profits in 2024 to be below 2023 levels. That signals another year of earnings declines for this growth stock. According to FactSet, Wall Street expects Tesla’s earnings per share to be just $2.95 per share in 2024. That would be a decline of more than 5% from last year’s $3.12.

The EV giant ranks eighth in the 35-member IBD Auto Manufacturers industry group. The stock has a Composite Rating of 32 out of a best possible 99. Tesla stock also has a Relative Strength Rating of 10 and an EPS Rating of 68.

Follow Kit Norton on X, formerly known as Twitter, @KitNorton for more coverage.

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