In October, Tesla’s (NASDAQ: TSLA) stock faced a substantial decline after releasing the company’s latest earnings report, which disclosed a notable decrease in profit margins linked to a series of price cuts announced throughout 2023.
Given this development, Bernstein, a research and brokerage firm, advocates for a short position on Tesla stock, considering it their “top idea for 2024.” Their analysts perceive almost 40% downside risk from current levels, as reported by Investing on December 8.
“At a fundamental level, 2023 has been a challenging year for Tesla, with 2023 EPS ~50% below consensus estimates at the start of the year. Yet amazingly, the stock has nearly doubled YTD,” analysts from Bernstein reported in a note to clients on Friday, December 8.
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Reasoning behind the shorting advice
Bernstein identifies Tesla’s primary challenge as a demand issue associated with its constrained and costly product lineup, primarily comprising the Model 3 and Model Y.
Their analysis indicates that Tesla’s product range confronts saturation and heightened competition in the electric vehicle (EV) sector, necessitating price reductions that adversely affect profit margins.
Analysts foresee this challenge enduring, predicting a shortage of new high-volume offerings from Tesla until 2026. The introduction of Cybertruck is perceived as having a restricted target market, with potentially underwhelming results regarding deliveries and profit.
Tesla stock analysis
As of the latest market data, Tesla’s stock price was recorded at $242.64, showing a rise of 1.37% over the past 24 hours. This change is part of a broader pattern observed over the past week, with the stock gaining 4.03% across five trading sessions.
This recent performance is part of a larger trend of robust growth for Tesla throughout the year. The company’s year-to-date increase stands at an impressive 124.46%. Over the last month, Tesla’s stock has continued to show positive momentum, recording a 9.24% gain. Looking at a six-month period, the stock is up by 3.31%, further underscoring its strong market presence.
However, despite these gains, it’s important to note that Tesla’s stock is still down by a considerable margin from its all-time high, a factor that investors should consider in the context of the broader electric vehicle market and global economic trends.
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