Tesla stock faced a new bearish rating that immediately affected early trading. HSBC, as per ratings-aggregation services on Thursday, launched coverage of Tesla stock (ticker: TSLA) with a Sell rating and a $146 price target, representing a significant 34% decrease from recent levels.
Despite the absence of the actual report, it seems that the issue revolves around valuation. The analyst believes that the electric-vehicle industry does not justify the current trading price of Tesla stock. Moreover, Tesla’s other ventures, including energy storage, self-driving cars, robots, and artificial intelligence computing, face regulatory hurdles which would impede their expected growth in the future.
Presently, Tesla stock holds a value of approximately $700 billion. However, if HSBC’s target price of $146 per share is reached, the company’s market capitalization would be closer to $470 billion.
The impact of the report is evident in the movement of Tesla stock. During premarket trading, shares experienced a 0.9% decline to $220.06 per share. Meanwhile, S&P 500 futures saw a 0.2% increase, and Nasdaq Composite futures remained relatively stable.
Over the past three months, Tesla stock has declined by approximately 8%. Concerns are arising regarding the slowing demand for electric vehicles (EVs). Although global battery-EV sales increased by approximately 25% year over year in the third quarter, this growth rate is slower compared to earlier in the year. Additionally, with an influx of EVs now available for purchase, competition for market share has intensified.
As per FactSet, around 43% of analysts covering Tesla currently rate the shares as Buy. In comparison, the average Buy-rating ratio for S&P 500 stocks is approximately 55%.
Although a new Sell rating does not significantly impact the Buy-rating ratio, it significantly influences the Sell-rating ratio. Currently, around 15% of analysts covering Tesla rate the shares as Sell, while the average Sell-rating ratio for S&P 500 stocks is close to 5%. Typically, analysts tend to avoid assigning Sell ratings and instead opt for Hold ratings on stocks they do not favor.
The average analyst price target for Tesla stock is around $239. Among the Buy-rated analysts, the average target price is approximately $290, while among Sell-rated analysts, the average target price is about $120.