JPMorgan predicts potential downturn for Tesla stock amid earnings erosion
Date
1/29/2024 4:50:37 AM
(MENAFN) JPMorgan, a prominent American bank, foresees potential downside risks for Tesla's stock as the electric car company's strategy of reducing car prices may lead to a decline in profits without a corresponding surge in revenues. The bank's analyst, Ryan Brinkman, has adjusted the target price for Tesla's shares for the upcoming December, lowering it by approximately 4 percent to USD130. This revision positions the target price 30 percent below Thursday's closing value at USD182.6, as reported by CNBC.
The cautionary stance follows a 12 percent decline in Tesla's shares after the revelation of quarterly business results that fell below expectations. The company also issued a warning that the growth in its car sales volume could experience a significant slowdown in the current year.
Tesla reported fourth-quarter revenues of USD25.17 billion, falling short of analysts' expectations set at USD25.6 billion. Additionally, the adjusted earnings per share stood at 71 cents, below the anticipated 74 cents, contributing to the market's reaction.
Ryan Brinkman noted that Tesla's strategy of reducing prices did not translate into a proportionate increase in revenues. Despite a 20 percent growth in car sales volume in the fourth quarter, actual revenues only recorded a modest 1 percent growth compared to the same period the previous year.
JPMorgan's analysis highlights a significant decline in profit expectations for Tesla since October 2022. Initial estimates in October indicated profits of USD28.5 billion by 2024. However, the current consensus among analysts places the company's operating profit expectations at a considerably lower level, standing at USD11.4 billion. This downward revision reflects ongoing concerns about the company's ability to balance pricing strategies with sustained profitability amid intensifying market competition.
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