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Bernstein warns of expensive valuation and a lack of catalysts, causing Tesla stock to plunge 33%.

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Investors in Tesla should take note of the warnings expressed in a recent analysis by Bernstein, as the well-known financial firm cut its stock-price goal for the massive electric vehicle (EV) company. After lowering the objective from $150 to $120, Bernstein predicts a significant 33% decline, pointing out alarming signs about Tesla’s growth and value.

Tesla is coming under more and more criticism despite being a pioneer in the EV business because of its high valuation and lack of immediate catalysts to drive up the price of its shares. This opinion was emphasized by Bernstein analysts under the direction of Toni Sacconaghi, who noted that Tesla’s stock price is still disproportionately expensive when compared to both traditional automakers and peers in the industry with faster growth. Furthermore, in comparison to its tech peers, Tesla seems expensive given its anticipated slower growth.

The financial fundamentals of Tesla are what motivated Bernstein to revise his analysis lower. Tesla has a reputation for having a strong growth trajectory, yet its present margins are either lower than or equal to those of more established automakers like Toyota and Honda. This fact, together with a cautious growth projection, has made it harder to justify Tesla’s high price.

With its stock price plummeting sharply due to missing results in the fourth quarter of 2024, Tesla has been facing serious issues. Tesla’s stock has dropped by an astounding 30% since the year’s beginning, intensifying worries about its value. In spite of this decline, Bernstein notes that Tesla is still valued six times more than its rivals; this difference might be attributed to past growth rates that are unsustainable in the present environment.

Analysts believe that one of the main causes of Tesla’s production problems is lower demand, since EV adoption is leveling off in important regions like the US and Europe. The failure of the Highland model’s arrival in China to rekindle demand as expected suggests that Tesla’s growth trajectory may be at a standstill. With lackluster growth expected to continue into 2025, Bernstein’s revised production prediction for the year, set at 1.98 million units, is below consensus forecasts.

Although some optimistic investors may believe that Tesla’s fully autonomous technology would revolutionize the automotive industry, Bernstein is skeptical, pointing out that other manufacturers are waging a tough war in this field. Furthermore, Tesla’s goals in the robotics and autonomous driving space face significant obstacles because well-established competitors like Waymo already dominate the market. The CEO of Tesla, Elon Musk, has further tempered expectations on the company’s technology endeavors by acknowledging the great odds facing the Dojo project.

Given that Bernstein’s downward adjustment highlights the company’s overpriced state and dearth of strong growth drivers, Tesla’s stock is facing formidable challenges. With growth prospects waning and margins approaching those of conventional manufacturers, Tesla is at a crossroads where underlying fundamentals may no longer support continued investor confidence. In order to restore its footing and prove its worth in investors’ portfolios, Tesla needs to properly handle these hurdles as the EV market changes and competition heats up.

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