Tesla investors need patience as scepticism grows, says analysts

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Tesla investors need patience as scepticism grows, says analysts

Tesla Inc (NASDAQ:TSLA) investors will need to remain patient as it enacts its turnaround strategy over the next year, but will feel the benefits in the years to come, analysts have said in response to Tuesday’s earnings.

Should the EV maker navigate through “this dark demand storm”, analysts at Wedbush are confident it can still achieve its “golden vision” of developing fully self-driving (FSD) autonomous vehicles in the years to come.

Musk outlined a roadmap for returning to growth at Tesla’s first-quarter earnings call last night and while financials during the period came in below estimates, shares jumped more than 10% on the prospect of a lower-cost vehicle.

A cheaper model is expected to begin production in the second half of 2025 and is predicted to cost between US$25k – US$30k.

Tesla’s plans represent a direct response to the rise of low-cost Chinese EVs and weakened demand across the globe.

Wedbush reckons the lower cost model “will be key to the Tesla volume turnaround” but is confident it “is the right strategy and move at the right time”.

While analysts at the broker believe Musk “finally stepped up as the adult in the room” by laying out a growth plan, they argue the importance is on the execution of said strategy.

“Execution of the lower cost vehicle and driving incremental demand in the key China market must be flawless….otherwise this could derail the bull thesis in the next 6 to 12 months,” Wedbush said.

Tesla keeps it “outperform” rating from Wedbush, but the bank lowers its price target by US$25 to US$275 – still a 71% premium to its current market value.

Scepticism grows

While Webush remains bullish on Tesla’s prospects, not all brokers are as convinced by Musk’s plans and, in particular, his comments.

Analysts at UBS say the lower-cost product will be welcomed but reckon Tesla’s attempt to position itself as an autonomy/AI play could leave some baulking.

In its earnings call, Musk said: “If somebody doesn’t believe Tesla is going to solve autonomy, I think they should not be an investor in the company.”

UBS said: “We don’t doubt that FSD is making progress, but TSLA has talked up autonomy before, and we are sceptical that TSLA will have a “cyber-cab” or ride-hailing service this decade.”

Similarly, those at Jefferies note that commitment to autonomy is “unwavering” but lacks clarity on timeframes and business models.

Meanwhile, it argues management comments on growing revenues and reducing inventories in the second quarter are “somewhat optimistic”.

Both UBS and Jefferies rates Tesla a “hold” and have issued price targets which linger around its current market value.

Looking forward, the analysts agree that August 8th’s robo-taxi day will be the next time investors will hear information on its FSD and autonomy plans.  

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