All the recent noise at
Tesla
has resulted in a Wall Street downgrade. That would typically push shares down—adding to the stock’s losses—but
Tesla
stock has brushed it off in early Tuesday trading.
Recent trading action is probably why.
Late Monday, Daiwa analyst Jairam Nathan cut his rating on Tesla stock to the equivalent of Hold from Buy. His price target was reduced to $195 a share from $245.
The average analyst price target for Tesla shares now sits at about $214, according to FactSet. With the downgrade, about 39% of analysts covering Tesla’s stock rate shares a Buy. The average Buy-rating ratio for stocks in the
S&P 500
is about 55%.
“We see corporate governance concerns aggravating already tough financial conditions in 2024,” wrote Nathan in his report.
The tough financial conditions are related to slowing sales growth of electric vehicles. EV sales have risen only about 5% in January, he said. Americans bought 1.2 million all-battery electric vehicles in 2023, up about 46% from 2022.
As for governance, those concerns stem from two Wall Street Journal articles alleging that CEO Elon Musk is a user of illegal drugs. The recent nullification of Musk’s 2018 pay package by a Delaware judge also calls into question the Tesla board’s independence; the judge wrote that she ruled against the company in part because conflicts of interest for board members were not disclosed.
It’s a lot for investors to digest. Tesla stock was lower in premarket trading, but things turned around shortly after the market opened. Tesla stock was up 1.8% in early trading, at $184.23, while the S&P 500 was up 0.3%.
That claws back some of Monday’s loss of almost $7 a share, or 3.6%, which came after a Journal article on Saturday alleged Musk took drugs with some Tesla board members. The Journal cited people who have witnessed the drug use and others with knowledge of it.
Tesla didn’t respond to a request for comment about the weekend report or about a similar article published in January.
While reports of drug use and weak governance can certainly affect investor sentiment, other automotive stocks were weak on Monday as well. Shares of
Ford Motor,
General Motors,
and
Rivian Automotive
dropped 4.5%. 2.9%, and 4.2%, respectively.
One problem for the entire sector has been rising interest rates. The U.S. 10-year Treasury bond yield closed at 4.162% on Monday, up from 4.023% on Friday. Higher interest rates make purchasing cars, which are often financed, more expensive. Higher rates have been weighing on sentiment among automotive investors for months.
Coming into Tuesday trading, Ford stock had fallen about 8% over the past 12 months, underperforming the S&P 500 by almost 30 percentage points.
Tesla stock was trading well off its 52-week high of $299.29, which shares reached last summer. The stock was being outperformed by some of its competitors early Tuesday as
Lucid
stock was down 0.3% to $3.21,
NIO
shares jumped 4.8% to $5.64, and
BYD
was up 5.4% in Hong Kong trading.
General Motors
stock was down 0.1% to $37.74.
Coming into Tuesday trading, Tesla shares have declined 24% over the past month while the
S&P 500
and
Nasdaq Composite
have gained 5.2% and 7.4%, respectively.
Write to Rupert Steiner at [email protected] and Al Root at [email protected]
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