Tesla’s first quarter results this year left plenty to be desired. The embattled EV maker’s sales fell short of Wall Street’s expectations, the second-worst quarter of sales since 2022.
The Elon Musk-led company has struggled for two years now to keep its core business alive as competitors, particularly from China, continue to eat its lunch, taking over vast swathes of the international electric car market.
Meanwhile, the company’s mercurial CEO — whose extremist rhetoric and embrace of far-right idealism has proven alienating to say the least — kicked off what could be a long and arduous pivot away from EV sales towards robotaxis and humanoid robots. The company’s progress on the former remains far behind the competition, while the latter is likely still years from going on sale.
In other words, the short-term prognosis isn’t exactly glowing. To underscore those jitters, JP Morgan analysts now warning that the company’s share price — which remains massively inflated compared to its business fundamentals with a price-to-earnings ratio of well over 300 — could drop by a whopping 60 percent.
“With expectations for Tesla performance having collapsed for all financial and performance metrics across all time periods through the end of the decade, the +50 percent rise in Tesla shares and +32 percent increase in analyst price targets as this collapse has taken place implies an expectation for a sharp pivot to materially better than earlier expected performance in the time beyond this decade,” JP Morgan analyst Ryan Brinkman wrote in a Monday note.
“We advise investors cautiously approach this expectation within the context of both execution risk and the time value of money,” he added.
He’s right that many signs point towards a major correction. The company’s shares are down over 20 percent over the past six months, but remains up an astonishing 44 percent over the last 12 months.
Following its Q1 delivery miss and JP Morgan warning of a share collapse, investors are clearly unimpressed, sending the stock sliding over five percent over the last five days.
It’s not just JP Morgan ringing the alarm bells. Last week, HSBC stock analyst Mike Tyndall reiterated a “reduce” rating on Tesla, also predicting that the company’s shares could crash by around 60 percent.
In short, as Tesla prepares to reinvent itself, its core business continues to stagnate. The company’s delivery numbers showed that it’s relying almost entirely on sales of its entry-level Model 3 sedan and Model Y SUV. Tesla hasn’t released a new car in six years — except for the Cybertruck, which turned out to be a major flop.
Making it all worse, Musk’s own commitment to the company and its original mission of selling EVs has been shaky at best.
“When I asked [Musk] what success looked like,” Tesla’s former president of global sales, delivery, and service Jon McNeill recently told the Washington Post, “he said, ‘success is getting me down to one day a week at Tesla so I can get back to my first love, which is rockets.’”
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