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HomeMarketTesla's Stock-Price Target Is Cut Again Amid Demand Concerns

Tesla’s Stock-Price Target Is Cut Again Amid Demand Concerns

Investors appear to have been worried by news about Tesla and CEO Elon Musk lately.

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David Gannon/AFP via Getty Images

 Price cuts, incentives, and potential production curtailments have Wall Street worried about
Tesla
‘s fourth-quarter deliveries. That is leading to price-target cuts for
Tesla
stock, although analysts are holding the line on Buy and Sell ratings.

Thursday, RBC analyst Joseph Spak cut his Tesla (ticker: TSLA) price target to $225 a share from $325. “Investors are concerned about demand, pricing, [gross profit margins] and Twitter distraction/overhang/impact on [Tesla’s] brand,” wrote Spak in a Thursday report. “These are valid concerns and a necessary re-calibration of expectations could weigh on the stock near-term.”

Several EV makers, including Tesla, have cut prices in China recently. Tesla is also offering incentives if Chinese and U.S. car buyers take delivery of vehicles by the end of December. Tesla CEO Elon Musk’s ownership of Twitter, meanwhile, has weighed on shares for weeks. Tesla stock is down roughly 30% since Musk bought the social media platform, underperforming the
Nasdaq Composite
by roughly 34% over the same span.

Along with his target-price cut, Spak lowered his forecast for fourth-quarter deliveries to 408,500 units from 419,000. Tuesday evening,
Goldman Sachs
analyst Mark Delaney made a similar call, lowering his fourth-quarter delivery projection to 420,000 units from 440,000 and reducing his price target to $235 a share from $305..

The Wall Street consensus figure is now at 436,000 units, according to FactSet. That is down from a peak projection of about 455,000 vehicles in September.

Both Delaney and Spak still rate shares at Buy. “We see the narrative of [Tesla] as the best positioned EV maker and meaningful [free cash flow] generation re-emerging in 2023,” Spak wrote.

Tesla is expected to generate roughly $15 billion in free cash flow in 2023. That is, very roughly, 15% of the total free cash flow Wall Street expects for the entire auto industry.

The average analyst price target for Tesla shares is down to about $281, compared with the peak of about $330 a share in April, according to FactSet. Back then, about 58% of analysts rated Tesla shares Buy. Now about 63% of analysts do. The average Buy-rating ratio for stocks in the
S&P 500
is about 58%.

Tesla stock was down 1.1% in premarket trading Thursday. Futures on the S&P 500 and
Dow Jones Industrial Average
were off about 1% and 0.7%, respectively.

The target cut might be weighing on shares, but Musk also sold another $3.6 billion in Tesla stock this week. That may have unnerved investors as well.

Coming into Thursday trading, Tesla stock was off about 55% so far this year.

Write to Al Root at allen.root@dowjones.com

Credit: marketwatch.com

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