3. Tesla Inc (NASDAQ:TSLA)
Number of Hedge Fund Investors: 99
Tom Narayan, RBC Capital Markets global autos analyst, said in a latest program on CNBC that he cut Tesla Inc (NASDAQ:TSLA) price target amid rising competition in the full self-driving space. Narayan slashed his price target for the EV maker by $120 to $320.
“What changed is we’ve had a lot of discussions with different management teams at OEMs. We just had Mercedes on the road last week talking about their level two, level three plus autonomy product. We had Aptiv at CES, and a number of companies talked about how they view autonomy as a me-too product for brand differentiation, rather than pricing it as a profit center. We also heard about BYD’s God Eye product, where they’re trying to make it standard on lower models. When we look at all that, we consider Tesla FSD. We initially thought they would be at $100 a month pricing down the road. Now we’re thinking this may be more of a commoditized product as other car companies offer this. Let’s drop this to $50 a month, which we think is more realistic.”
Tesla’s EV sales are falling all over the world as the company faces challenges from competitors. For example, in California, the largest U.S. market for electric vehicle adoption and sales, Tesla sales fell about 12% year over year in 2024, causing its market share to drop from 60.1% in 2023 to 52.5% in 2024. Was it because Californians are buying fewer EVs? No. Californians purchased more than 2 million electric cars during the year, almost double when compared to the past two years.
Things aren’t looking good for Tesla in Europe, either. For example, in Germany, Tesla delivered just 1,429 new cars in February, down 76% from the same month last year. In contrast, battery-electric vehicle (BEV) registrations surged 30.8% during the month.
Tesla Inc’s (NASDAQ:TSLA) product lineup is showing signs of stagnation, with over 95% of sales still coming from the Model 3 and Model Y. Meanwhile, competitors are rolling out more advanced models. According to Reuters, Tesla’s market share in Europe is slipping as legacy automakers like BMW post stronger sales. Chinese competitor BYD is also gaining ground in Europe, despite talk of tariffs.
Polen Focus Growth Strategy stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q4 2024 investor letter:
“The largest relative detractors in the quarter were Tesla, Inc. (NASDAQ:TSLA) (not owned), Thermo Fisher Scientific, and Broadcom (not owned). We’ve spoken at length about our rationale for not owning Tesla. The stock enjoyed a 54% return during the quarter, with effectively all of the share price performance strength coming in the post-election period, as the market expressed a positive view on Elon Musk’s prominent role in the incoming Trump administration and its potential implications for Tesla. While we agree this development should be a net positive for Tesla and recognize the company’s interesting future prospects for autonomous driving and humanoid robots, its current valuation demands that shareholders pay primarily for potential innovations that have yet to materialize, with uncertain risks and timelines, presenting a different type of risk profile than we are comfortable with. Today, Tesla is an automobile manufacturer limited to the higher-income segment and is increasingly challenged to sell vehicles when interest rates are not zero. As such, we continue to question the company’s long-term growth profile, its ability to scale a large robotaxi service (which seems to be the source of euphoria in Tesla shares), and its corporate governance.”
